What is Professional Indemnity insurance?

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Not certain if professional indemnity insurance is necessary for your business? Or perhaps you just want some insight into how it works? This blog will provide a quick, easy breakdown on professional indemnity insurance (or PI insurance), and how it can protect your business when things don’t always go according to plan.

Let’s say that in providing a service or giving advice to a client or customer, an employee makes some type of error. Perhaps they give out the wrong piece of advice, misstate a fact, or fail to convey an important piece of information. If the client alleges any of these acts resulted in their own financial loss, and makes a claim for indemnity, then your business may incur expensive compensation costs. If you believe the client’s claims to lack merit, and choose to defend the business against these claims, then associated legal costs can also be a costly burden. On top of this, a claim for indemnity may result in time-consuming disruptions, added levels of stress, and negative impacts on the reputation of your business. 

Professional indemnity insurance can be used to protect your business in moments where malpractice, professional misconduct, or a breach of duty occurs. You could be held responsible not only for your own actions, but also for those of your partners, employees, or volunteers. PI insurance is put in place to protect the insured party from an alleged breach of professional duty owed to a third party, giving you the best chance of avoiding/minimising these potentially expensive costs.

Do I need Professional Indemnity Insurance?

It’s first important to find out if you need professional indemnity insurance. Often, it will be critical when providing advice or service to clients is a large part of the business operation. In certain industries, such as those delivering financial, legal, medical, or accounting advice, professional indemnity insurance will be mandatory, in accordance with laws of the state. However, other areas, where advice or a service is consistently delivered to a client or customer, should also consider the importance of professional indemnity insurance to protect the business and its employees. These include, but are not limited to marketing consultants, IT professionals, HR and recruitment agencies, clerical services, training consultant services, management and business professionals, and more! If you don’t see your profession listed, please do not dismiss the need for professional indemnity insurance, as this could be costly to your business.  The importance of professional indemnity insurance is not to be understated.

Get in touch for assistance in assessing your PI insurance needs!

What type of policy is necessary?

Knowing if you need professional indemnity insurance is one thing but knowing how much is another. This will very much depend on the operation of your business, ensuring the policy is designed around the specific requirements of the company. Not having an adequate level of cover can result in holes that can leave you and your business vulnerable. As a result, it is important to understand the nature of your business (i.e. if an employee makes a mistake, what losses could a client realistically suffer?) We also understand that you may have a budget in mind for what you are prepared to pay for PI insurance, as it is important to balance these risk preferences. However, know that a governing body may have already decided the type of professional indemnity insurance that you need to continue operations (depending on your profession). Similarly, contract terms between you and the client may also require a minimum level of PI insurance. 

There are also considerations made on your behalf when calculating the premium. This may include the nature of your work, staff numbers, selected excess, generated fees, and your claims history. Selecting the right policy is where an insurance broker can be of assistance so that you can have a professional analyse the needs of your business and suggest a policy that can provide an effective level of protection. 

What does Professional Indemnity insurance protect a business from?

There are a variety of circumstances where PI insurance will come into effect. Compensation owing to a third party is important when the business is negligent. This may include civil liability claims to the third party arising out of the conduct of their professional business, as well as costs and expenses that the business suffers as a result of a claim made against it. Professional indemnity insurance can also cover defence costs when a business chooses to defend a client’s claim. This is very useful for when the claims are fabricated by a disgruntled client, covering legal costs that can quickly add up. Similarly, if an employee acts in a dishonest or fraudulent manner, professional indemnity insurance can also help a business recover any direct financial loss as a result of this conduct—so long as it is during the period of insurance. Lastly, PI insurance can also cover defence costs in instances where a regulatory body makes an inquiry into the professional conduct of a business. These are some of the numerous benefits of professional indemnity insurance. 

How to obtain PI insurance?

Knowing whether professional indemnity insurance is needed, how much is necessary, and how best to acquire an adequate level of protection, are all great questions for an insurance broker. 

Chimera Insurance Brokers is pleased to offer a combined Professional Indemnity, Public Liability, and Products Liability Insurance Package. Not sure of the difference between the two? Find out more here

Contact one of our Professional Indemnity Insurance experts to find out more. Otherwise, feel free to click here to apply online and obtain a quote. 

If you have any further questions or you would like assistance in assisting your Professional Indemnity Insurance needs please be sure to contact one of our Professional Indemnity experts.

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