Professional Indemnity Insurance (also known as PI insurance or professional liability insurance) pays for your legal costs as well as any compensation payments that may be due. PI insurance also allows you to be covered if your client takes legal action against a mistake you’ve made when providing any service that is part of your business.
So, What Is Professional Indemnity Insurance?
Professional Indemnity Insurance serves as a safeguard in case you make a mistake while working on a project for a client, resulting in financial harm to them. It is there to protect you if you make a mistake in a work-related setting when working for a client, causing them a financial loss. These mistakes could include things like providing incorrect advice, substandard services and even incorrect designs.
As these mistakes can cost clients’ time and money and create frustration, they may decide to take legal action against you or the small business to recover their money lost. Professional indemnity insurance pays the legal cost to defend you. It provides a way to pay any compensation payments that may be due to your client due to the mistake you created.
While there could be times when you as a business have done nothing wrong, a client can still make an unjustified claim against you, which can cost a significant amount of money to defend your case. Having professional indemnity insurance can cover you against such circumstances and give you peace of mind.
What does Professional Indemnity insurance cover?
- Professional Negligence – It could be anything from committing an error in a client’s project or providing them with inadequate guidance.
- Breach of client confidentiality – You could accidentally share sensitive business data without a client contest
- Breach of copyright – This could be anything from accidentally using a picture on your business website without permission or using designs that aren’t yours
- Defamation and libel – This could be making false statements/comments about a competitor or client, which could, in turn, harm their reputation.
- Loss of documents/data
- Loss of money/ goods
Who would need Professional Indemnity Insurance?
Professions such as accountancy, architects, chartered surveyors, counsellors and therapists are required by their industry body to have professional indemnity insurance within their business already. However, having PI insurance is beneficial for many vocations as without it, you could be liable for thousands in legal fees and compensation payments.
Professions that should look into getting PI Insurance:
- Those who provide advice or a professional service
- Those who provide designs to their clients
- Those who work as contractors, consultants, freelancers or those who are self-employed
Ultimately, having Professional Indemnity insurance will provide peace of mind for any profession as you are covered for unintentional mistakes, allowing you to focus on your business and keeping your customers happy.