Professional Indemnity Insurance

What is professional indemnity insurance?

Professional indemnity insurance covers you if a client claims compensation for a mistake in the advice you have given them, an error in your designs, plans or calculations, an accidental disclosure of sensitive data or an infringement of a client's legal rights. It pays the compensation your client is owed for any monetary loss they suffer, and it covers your legal fees for defending the claim.

Mistakes can occur in many areas, from measurements to strategic advice. Anything you were responsible for that causes a client to lose money could lead to that client claiming against you, and professional indemnity insurance is the cover designed to meet that cost.

Who needs professional indemnity insurance?

Businesses that offer advice or professional services, or that handle client data and intellectual property, are the ones most likely to need or want professional indemnity insurance. If a client could lose money because of something you got wrong, the cover is relevant to you.

In some cases it is not optional in practice. Some clients will only work with businesses that hold professional indemnity insurance, and some professional bodies and industry associations make it compulsory for their members. Check the terms of your contracts and any membership you hold before deciding whether you can go without it.

What does professional indemnity insurance cover?

It covers your compensation payments and legal fees when a client claims against you, so any monetary loss your client suffers because of your error is met through the compensation payment. Clients can make claims of the following kinds:

• Negligence – for example, one of your employees loses or misplaces important documents containing secure information, putting the client at risk of losing money.
• Infringement of intellectual property rights – not holding the appropriate rights and licensing for copyrighted images and photos can allow the copyright holder to sue for damages.
• Breach of confidence – sharing confidential or commercially sensitive information without the owner's prior consent.

Policies also respond to claims for:

• Libel, slander or defamation
• Employee dishonesty
• Accidental transmission of a computer virus

What happens if I do not have professional indemnity insurance?

If a third party makes a claim against you and you have no professional indemnity insurance, you may have to pay hefty amounts in damages yourself, as well as deal with the reputational damage that follows. That can put your business in trouble or cost you the business altogether.

Claims can reach hundreds of thousands of pounds, if not millions, so a policy that covers these costs is what protects your company if a mistake is made. Professional indemnity insurance does not cover every risk a business faces, so it is usually held alongside other business cover rather than instead of it; it can be bought as standalone cover or included as part of a wider business insurance policy.

How much professional indemnity cover do I need?

Cover levels range from £50,000 up to and beyond £2 million, and the right level depends on the size of the losses a client could suffer because of your work. The figures below are the ones that apply across the market.

If a client or professional body requires professional indemnity insurance, they will often specify a minimum level, so check that requirement before you choose. The cover can be bought on its own or as part of a business insurance policy that encompasses other areas.

How much does professional indemnity insurance cost?

There is no single price: each business's premium is determined by the type of work it does, whether or not it has made a claim before, and the level of cover it chooses. Higher cover levels and a history of claims will push the price up, while lower-risk work and a clean record keep it down.

Because the price depends so heavily on your own circumstances, the only reliable way to find out what you would pay is to get quotes based on your details and compare them side by side.

Is professional indemnity insurance a legal requirement?

Professional indemnity insurance is not a general legal requirement for UK businesses, but some professional bodies and industry associations make it compulsory, and some clients will refuse to work with you without it. If you belong to a professional body or sign client contracts, check their terms, because for many professionals the cover is effectively mandatory even where the law does not demand it.

How do I compare professional indemnity insurance quotes?

Quote Goat provides access to a comparison service: complete one short form with details of your business, the work you do and the level of cover you want, and you can compare live quotes online from a panel of UK business insurers. You then choose whether to go ahead with the policy that suits you.

When comparing, look beyond the premium. Check the cover level against what your clients or professional body require, confirm the policy responds to the types of claim that matter for your work, and decide whether you want standalone professional indemnity cover or a wider business insurance policy that includes it.