What does professional indemnity insurance cover?

Professional indemnity cover explained

Professional indemnity insurance covers the costs of a compensation case brought against you by a client for mistakes made during the course of your work, disputes over your contract and intellectual property.

However careful you are, mistakes and misunderstandings can happen during the course of a job and even small mishaps could lead to a costly claim against you, therefore professional indemnity insurance is key to protecting your business. For a full definition of professional indemnity insurance check out our in-depth guide.

What is not covered by professional indemnity?

While professional indemnity insurance will cover you for many of the unexpected errors that can occur on a job - including professional negligence, unintended breaches of confidentiality or copyright, the loss of documents or data, and will offer reputation management support – unfortunately it won’t cover you for things like bodily injury or property damage (this comes under public liability insurance).

There are also a number of instances where even if you do have the right cover you may still be held liable for claims against you including:

  • If the claim includes personal injury such as wrongful eviction, libel, slander, wrongful detention, false arrest etc.
  • If the event occurred before your policy started.
  • If you wilfully disregard or refuse to comply with statutory regulations.

Luckily, most of these examples are easily avoided in the day to day running of many businesses. So, as long as you stay informed on the latest rules and laws that apply to your industry, and regularly make sure you have the relevant level of cover in place, professional indemnity insurance cover will protect you from unintentional errors at work, contract and IP miscommunications.

The type of work PI insurance covers

If you work in professional services it’s pretty much a guarantee that you will need professional indemnity insurance. However, if you are still unsure whether the risks that professional indemnity insurance covers apply to your work, ask yourself a few quick, simple questions:

Does my business provide expert advice or consultancy to clients?

For example, management consultancy, accountancy, fitness coaching etc.

For example, if I design or make creative goods or content e.g. photography

Within my work could I be exposed to claims of professional negligence?

For example, if I offer health advice or training e.g. healthcare professionals

Do I have access to confidential customer information?

For example, contact details, medical history etc. e.g. wellbeing businesses

Am I, a freelancer, contractor, consultant or someone who provides services on a self-employed basis?

For example, a freelance electrician or software developer.

Did you answer yes to any of the above questions? Is your work relevant to one of the examples? Then it is highly likely you will need professional indemnity insurance to ensure your business is protected from potential risks.

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