A look at Professional Indemnity Insurance

A look at Professional Indemnity Insurance Thumbnail Image

While you may be doing everything to ensure your business is carrying out its day-to-day operations in a flawless and exemplary manner, no one is perfect. Mistakes will be made, and when they are, it is important to make sure your business is protected. Taking proactive steps such as buying a suitable insurance policy will prevent your business from bearing huge expenses. If you feel unsure about purchasing an insurance cover, read below a detailed breakdown of why you need it and how it will help you.

Why do you need Professional Indemnity insurance?

It is possible that you or an employee will make an error in carrying out the services of the business, such as giving incorrect advice or unintentionally omitting vital information. The mistake may include breaching confidentiality obligations or making an error in judgement that results in the financial loss of a client. If this occurs, your business could be susceptible to claims for the compensation of damages and a lengthy disruption to business operation. Or perhaps an unsatisfied client makes a claim for indemnity, which may have little merit, but still requires you to pay for legal costs in order to defend the business.

Defence costs, compensation orders, as well as damage to your business’s reputation can be a heavy price to pay. Simple mistakes, that anyone can make and may seem trivial, can actually have dire consequences if a client believes they have been negatively impacted.

Professional Indemnity insurance gives you the best possible chance to protect your business against these risks. Often referred to as Professional Liability insurance or PI insurance, Professional Indemnity insurance policies are designed to protect the insured party from an alleged breach of professional duty owed to a third party.

Who is Professional Indemnity insurance for?

If your business operation includes professionals providing advice or a service to clients, then Professional Indemnity insurance is for you. For many industries, Professional Indemnity insurance will be mandatory. If your business provides advice in fields of medicine, accounting, law and financial advice, you will most likely be required to have Professional Indemnity insurance that complies with the laws of the state.

This list is not exhaustive, and if you are still wondering whether you need Professional Indemnity insurance for your business, get in touch to find out more here.

How does Professional Indemnity Insurance protect your business?

Professional Indemnity insurance can protect your business in a wide range of circumstances. This includes:

The defence costs that are required in defending a claim from a client, outlined within the insurance policy. Even if the claims are false and have no validity, the policy will cover costs associated with the legal fees of defending yourself or the business.
Compensation owing to the third party if it is proven that you or an employee of the business is negligent, including:
Civil liability claims to the third party arising out of the conduct of their professional business.
Any additional costs and expenses that the business suffers as a result of a claim made against it.
Costs associated with defending the professional conduct of your business on the occasion of a regulatory body inquiry.
If the business suffers direct financial loss as a result of an employee’s dishonest or fraudulent conduct (when the conduct occurs during the period of insurance), Professional Indemnity insurance may be able to recover the loss.

How much Professional Indemnity Insurance is the right amount?

How long is a piece of string?

The right amount of Professional Indemnity insurance will depend very much on the unique operation of your business. Professional indemnity claims can be a costly burden for your business, so it is vital that the policy you have selected is specific to your needs and able to protect your business in the event of a claim. The question, ‘what is the right amount of Professional Indemnity insurance?’, is one that should be directed to your insurance broker, in order to get an accurate assessment of your insurance needs. While an insurance broker is the best way to ensure the policy you purchase satisfies the requirements of your business, some considerations when selecting the right amount of cover include:

The nature of your business: If a mistake was to be made by you or an employee of the business, what is the potential loss your client could suffer?
What are you prepared to pay for preferred insurance cover? As each policy will have varying levels of cover and features, it is important to find a product that strikes a balance between your budget and risk preferences.
The regulations of your profession: governing bodies of your profession may dictate the level of Professional Indemnity insurance required by your business.
Contract terms: the terms of a contract between you and a client may require a minimum level of Professional Indemnity insurance.

Calculations of premium will also take into account a range of considerations. This includes your occupation and the nature of the work you undertake, any generated fees, the number of staff employed, your sums insured, selected excess, and claims history.

How long does Professional Indemnity Insurance last?

The insurance cover can last for as long as mentioned in your policy. You should have a Professional Indemnity insurance cover when providing services or advice.
If you retired from your services or sold your business, you should still have a run-off insurance cover for at least 12 months. Sometimes, you could need a run-off cover for up to 6-7 years based on your industry and business. A run-off cover is important to protect you against any claims made by your clients after you have retired or ceased trading.

The Next Step

So now that you know a bit more about Professional Indemnity insurance, the next step is finding out what level or type of cover is required to protect your individual business. No one is better suited at answering these questions than an insurance broker.

Cerberos offers a comprehensive combined Public Liability and Professional Indemnity insurance package. Not sure of the difference between the two? Find out more here. Unlike other brokers, we will give you complete guidance in understanding the claim process and policies so you’ll never have to worry about ‘how do I claim professional liability insurance?’

Otherwise, you can quote, bind, pay the premium and receive full policy documentation online within a few minutes. You can pay in full or by monthly installments. Get started today!

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