Do I need Professional Indemnity Insurance Insurance?
Professional Indemnity insurance is an essential form of cover for anyone who provides professional advice or services to another individual or business. It is a common requirement for contractors who work for the government or an organisation with insurance listed as a condition of the contract. Common professions which require Professional Indemnity include real estate agents, accountants, IT contractors and management consultants.
Some occupations are required by law to have Professional Indemnity insurance.
Before you start sharing your words of wisdom, make sure you have the right insurances in place, to protect your business against claims for negligence, malpractice or professional misconduct.
You’ve put in the hard work to build up your reputation and expertise, and all it takes is an unhappy client, regardless if you are at fault or not, to potentially destroy your business for good. That’s where Professional Indemnity insurance comes in to play.
If a client makes a claim against your business for an omission or mistake which causes them financial loss or injury, you can rest easy knowing that your Professional Indemnity cover will help safeguard your hip pocket.
Typically your Professional Indemnity insurance policy will cover the legal and defence costs of a claim and compensation if awarded to the client. Remember that the defence cost of a claim can outweigh the actual costs of the compensation amount, especially if the case takes a lengthy time to defend.
Why is it important for your business?
As careful as you may be, unintentional mistakes, accidentally omitting information, making an error of judgement or providing the wrong advice can happen to the best of us. Unfortunately, an accidental wrongdoing can lead to a claim, making Professional Indemnity insurance vital for protecting your business and its reputation.
The importance of having Professional Indemnity insurance is often underestimated by small businesses, especially when it comes to adding up the legal cost associated with defending a claim. Even if you’re not found negligent, the related legal and court cost could be enough to cripple your business financially.
And it’s not just the financial aspect to worry about. Court cases can drag on for ages, taking up your precious time and resources. How will you be able to recover from days of lost business if you are required at court attendances and legal proceedings?
If your business is not just a solo show, you can rest easy knowing your Professional Indemnity policy not only covers your actions but also those of your and employees.
Professional Indemnity insurance provides a financial safeguard, so you can go about your day with confidence knowing that your business is protected if the worst were to happen. Having the right insurance in place means your business can keep running as normal with minimal disruption to your bottom line.
Is it mandatory for your profession?
One of the first places to check this is with your industry regulator or professional body. They will be able to advise if a minimum level of cover and certain covers are also required with your policy.
Some professions requiring Professional Indemnity insurance include accountants, architects and consultants. For many of these professions, the governing body establishes strict guidelines that specify what level of cover is required. Here are some examples:
Minimum Level of Cover
Migration Agents Require at least $250,000 of cover
Accountants Require at least $2 million of cover
Bookkeepers $250,000-$1 million depending on turnover from BAS services
Mortgage Brokers Require at least $2 million
Real Estate Agents Require at least $1 million
The requirements for the level of cover required vary from profession to profession and you may find that your client contracts will outline a minimum level of cover required. Even if the contract does not require your business to hold Professional Indemnity cover, you may still want to insure your business not only to reassure potential clients but to protect your business for the long run.
What is NOT typically covered?
- Intentional damage
- Any known claims and circumstances that are known prior to the period of insurance
- Fraudulent and dishonest acts
- Accidental injury and property damage