In the day-to-day operations as a professional it is possible to unintentionally omit information, breach confidentiality, give incorrect advice or make an error in your judgement which subsequently causes loss to your client. Such errors expose your business to potential claims for the compensation of damages.
The threat of claims and litigation is very real and can potentially lead to the collapse of businesses, no matter their size. Simple mistakes made in the course of business or the potential threat of a false claim from a disgruntled client has the potential to significantly disrupt your business. It’s easier to identify with a claim scenario where an error or omission has occurred, however most businesses don’t consider the potential of claims with little or no merit being lodged against them for which significant defence costs can apply. Although it may seem like a distant possibility, ask yourself: “how would my business cope if an indemnity claim was made against me?”
Professional Indemnity Insurance, often referred to as professional liability insurance or PI insurance, is designed to protect the insured entity, its directors and staff from claims arising from an alleged breach of professional duty owed to a third party.
Professional indemnity insurance protects policyholders in two ways:
- The policy responds to protect you against the legal costs of involved in defending yourself or businesses from claims made against you. The policy will respond even in the case where these claims are false. These defence costs can be significant even when defending yourself against a claim with no validity whatsoever.
- Professional Indemnity insurance will cover the payment of compensation owing to the third party in the event you are proven negligent.
Who Needs Professional Indemnity Insurance?
Professional Indemnity insurance was designed for professionals who provide advice or services to clients. Professions where Professional Indemnity Insurance is particularly relevant include, but are not limited to:
- Management and Business Consultants
- Information Technology (IT) Professionals
- Marketing Consultants
- Recruitment and Human Resource Agencies
- Clerical Services
- Training Consultant Services
How Much Professional Indemnity Insurance is Right for Me?
Professional Indemnity claims can be very expensive, so it is important to select a level of cover that can properly protect you and your businesses in the event of a claim. As every business is unique, there is no ‘one size fits all’ when it comes to selecting the right amount of Professional Indemnity Insurance suitable for your business’s needs. To get an accurate assessment of your insurance needs it is highly recommended that you contact your broker, but as a starting point here are some points to consider when selecting your amount of cover:
- Consider the nature of your business:
- In the event of a problem occurring what could be the potential financial loss? What are the sizes of your contracts? How much could your clients lose in the event of a loss?
- You must consider your appetite for risk and what are you prepared to pay for your preferred insurance cover:
- In the event of a potential loss how much exposure are you willing to carry for yourself? i.e your excess.
- Different insurance products can have varying levels of cover and features. Which of these covers provides you the maximum amount of risk given your budget and risk preferences?
On occasion the level of Professional Indemnity Insurance may be dictated by professions’ governing bodies or even by your clients. For instance, the terms of contracts will often require your business to maintain a minimum amount of Professional Indemnity Insurance. In such instances, it is essential that you are compliant with the required level of cover.
How are Premiums Calculated?
Premiums can be calculated based on your occupation, the work you undertake, the fees you generate, number of staff, your sums insured, selected excess and claims experience.
Is There a Difference Between Public and Products Liability and Professional Indemnity?
Yes! Many firms are able to identify their Public and Products Liability exposures and often mistakenly believe this covers them against all liability exposures. But this is not the case.
Product liability insurance provides protection against any bodily injury or property damage that may occur as a result of products that you supply or manufacture. This could include software, hardware or equipment, foods, beverages or nutritional supplements.
However, this does not provide sufficient cover for your provision of services.
To ensure that your business is adequately covered, Cerberos Brokers offer a combined Professional Indemnity, Public Liability and Products Liability Insurance Package.
Combining the policy with professional indemnity and products liability with the one insurer avoids any doubt in respect of whether a loss has arisen from a professional service or the supply of a product. With a combined insurance policy with the one insurer this is not a concern.
Hopefully you know have a better understanding of what Professional Indemnity insurance means to you.
Are you a professional with Public Liability and Professional Indemnity needs? Cerberos offers a comprehensive combined Public Liability and Professional Indemnity insurance package. You can quote, bind, pay the premium and receive full policy documentation online within a few minutes. You can also to pay in full or by monthly instalments. Get started today!
If you have any further questions or you would like assistance in assessing your Professional Indemnity Insurance needs please be sure to contact one of our Professional Indemnity experts.