What is professional indemnity insurance?
Professional indemnity insurance (PI) can help protect your business if a client claims there’s a problem with the work you’ve done for them. It can cover your costs if you need to pay compensation to correct a mistake or settle a claim, and can also cover your legal defence.
You may be an accountant, and a small mistake in your bookkeeping could lead to a client losing money or being fined by the Inland Revenue. You could be a consultant whose professional advice has unintended consequences. Or you might be a fitness instructor or a dance teacher, sued by a participant in your class who injured themselves after attempting an exercise you demonstrated.
Who needs professional indemnity insurance?
The above are just a few examples of the kinds of situation professional indemnity insurance covers. It is recommended for any professional providing a service to a client. This service might come in the form of professional advice; teaching, accountancy, design, surveying, engineering and repair, transportation and storage of goods, implementation of health and safety and many other examples. It is also useful for publishers, journalists and other writers who may be accused of defamation, libel or of publishing misleading or inaccurate information.
What does PI cover?
The cost of getting things wrong can be extremely high.
A mistake in your work could result in a client or third party taking legal action against you in respect of costs incurred, which they feel you are responsible for. You may disagree, but you might still have to fight your case in court. Professional indemnity insurance will cover you for your legal expenses in the event of any such action, as well as any financial compensation you have to pay as a result.
Some of the situations that professional indemnity insurance provides cover for include unintentional breaches of copyright; the accidental leaking of confidential documents or data and most forms of professional negligence. For instance, when a job or piece of advice is found to be flawed, with unhappy results. Professional indemnity insurance will also cover you if goods or money you were temporarily responsible for are accidentally damaged or lost.
Is PI required by law?
Professional indemnity insurance is not a legal requirement across the board; however, it is required in order to conform to statutory regulations in many industries, including surveying, accountancy and law. Anyone bidding for a contract to provide consultancy work will also need to have PI in place if they want to be considered as being reputable.
PI is your safety net. Even if you know you’re not in the wrong, legal action can be extremely costly in terms of fees as well as the damage to your reputation and possible interruption to your business. We live in an increasingly litigious society, with typical claims running into thousands of pounds including costs.
Professional indemnity insurance can protect you against the chance of being financially ruined by a momentary oversight. Anyone can make mistakes, but to be properly protected against the consequences is an extremely sensible idea.