What do you need to know about Professional indemnity insurance?
Professional Indemnity Insurance (PI) can be difficult to comprehend, but only at first. In this article, we explain what professional indemnity insurance is and why it might be important for your business.
What is Professional Indemnity Insurance?
Professional Indemnity Insurance is a form of business insurance for professionals who are in industries where others may use and rely on their professional advice. Being regarded as an ‘expert’ in a field, may mean that others may take legal action against you if they suffer a loss from your professional advice.
For example, if you are an accountant and are responsible for preparing and lodging your client’s tax returns, a failure to lodge the tax returns on time can result in interest and penalties for your client. Your client could take legal action against you for a breach of your professional duty.
Professional Indemnity Insurance may protect you from such action by covering claims for compensation made against you and legal defence costs up to your specified amount of cover, and after taking into account your excess (note that you would need to look at your policy wording to look at what specifically is covered).
Misconceptions Around Professional Indemnity Insurance
A common misconception professional indemnity insurance claims only arise because the business does inadequate work for the client. This is not true, in this day and age anyone can attempt to sue anyone else over almost anything and sometimes they even win. Even when they do not win, the claim can be detrimental for a business’s reputation and their finances by just defending themselves.
If you were involved in consulting or advising a client and they have suffered a financial loss, the client may want to look at all possible options for compensation this could result in them filing a claim against you. For example, you may be a private consultant you made an error in numbers causing your client a financial loss and putting you in the hot seat.
A lot of practices, even the ones with clean claims records, should be cautious. Increasing the amount of coverage if is appropriate, may be necessary from time to time depending on the size of a job contract or the level of risk involved. Businesses or consultants whose insurance coverage is not sufficient may need to draw funds from their own pockets and that is never a good thing. With professional indemnity insurance you do not have this problem.
Cover may be mandatory!
Whilst you can generally choose what sort of cover you want for your business, and how much cover to get, there will be some instances where Professional Indemnity Insurance with a certain level of cover is mandatory.
Tips for getting the best Professional Indemnity Insurance
Invest some time shopping around for Professional Indemnity Insurance is key. This is why comparison sites are helpful to find the best cover that suit your business. Comparison sites like BizCover allow you to get live online quotes, and purchase it directly.
This is general advice only.