Professional indemnity insurance
Professional indemnity insurance covers your business for financial loss including legal costs and expenses incurred in your defence, as well as any damages or costs that may be awarded, if you are alleged to have provided inadequate advice, services or designs that cause your client to lose money.
Any sole trader or business who provides advice or skills and knowledge as part of their service, should consider professional indemnity insurance. Professional indemnity insurance protects individuals and businesses against claims brought against them for financial loss due to negligence, incorrect advice, or mistakes. Compensation and legal costs incurred can be financially crippling to small businesses and sole traders.
If yours is a professional service where you provide a service, advice, or designs for a client, you can be liable to claims made against you for financial loss from potentially inadequate work that you have provided. Professional indemnity insurance provides individuals and businesses with cover against compensation and legal costs incurred as a result of negligence, incorrect advice, or mistakes made.
Professional indemnity insurance may not be a legal requirement but is an essential insurance to protect your business.
A Typical Package
A typical Professional indemnity insurance package will include the following covers:
Negligence or breach of duty of care covers you for making a mistake in a piece of work for a client or for giving them poor advice.
ntellectual property insurance covers the costs of defence of an intellectual property infringement suit and any resulting settlements or judgments.
Breach of confidence insurance cover, covers you if a client takes legal action against you following a breach of confidentiality to a third party
Defamation insurance cover, covers you if a client takes legal action against you following a successful lawsuit for defamation of character
Frequently Asked Questions
We have tried to answer some of the most common questions we get asked below.
What is a retroactive date on a professional indemnity policy?It’s the start of the period for which your company has held uninterrupted professional indemnity cover. It is important that this date is provided to your current insurers to ensure that they accept any liability for past work provided.
Is professional indemnity cover compulsory?No, but very often governing bodies will stipulate it, for example RICs and chartered accountants.
What is the basis of settlement for a professional indemnity policy?Professional indemnity policies are what is known as a ‘claims made’ basis. I.e. any claim which comes in is picked up by the policy in place at the time the claim is made not when the actual work was undertaken
How is my professional indemnity premium calculated?This is generally calculated by fee income/turnover in the business plus the level of indemnity level required.
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