Professional indemnity insurance is a significant type of insurance for a business. It is specifically related to those in occupations that offer advice for a living. A professional can be defined as anyone who “offers advice or services of a proficient person based on accepted principles”. A claim for reimbursement as a result of wrong professional advice or services, whether your business is big or small, can impede the progress of your business seriously.
What is the meaning of professional indemnity insurance?
Professional Indemnity insurance protects against claims for liabilities indebted to a third party (usually a customer of the insured) for the loss suffered by the third party originating from the insured providing ‘professional services’. To ‘indemnify’ means to secure the insured for the liability indebted to the third party for the loss suffered.
Professional Indemnity insurance hence is a type of insurance that can save your business. It protects you against claims for financial loss or physical/personal injury and/or property hurt that stem from an act, mistake or omission in the performance of the professional services covered by the policy.
For instance, wrong designs made by an architect, false advice offered by a migration agent regarding visa requirements, and frustration to identify unsafe work conditions by work, health, or safety consultants can all lead to a financial loss or physical injury to a client and therefore result in a potential claim for reimbursement against the insured.
Why is professional indemnity insurance important?
Occasionally it’s probable in your profession to inadvertently infringe privacy or confidentiality, delete information, make a misjudgment or provide incorrect advice. A simple act, mistake or omission can result in a claim against your business, therefore making it essential to protect yourself, your business, and your reputation.
Professional Indemnity insurance is significant as the legal expenses related to defending any claims can be important. Court and other legal costs to protect your business are often underrated, and small businesses, in particular, can struggle to find the money to pay for this, regardless if they are found liable or not for damages. Court cases can also persist for extended periods of time, with ongoing expenses over years which can have a significant financial effect on your business.
Professional Indemnity insurance is vital as it can save you from bearing the full cost of these claims. This can permit you to keep your business up and running as normal, without too many disturbances to your normal operations.
Who needs professional indemnity insurance?
Professionals like lawyers, accountants, bookkeepers, architects, engineers and marketing specialists are a few of the occupations where Indemnity insurance can apply. Occupations that have more hands-on jobs are less likely to need Professional Indemnity insurance. However, it can still apply in some cases. Agricultural consultants, event managers, life coaches and marriage celebrants are some of these exceptions.
Whatever industry you work in, as a professional in that industry, you hold the accountability that your advice or services are of quality. Therefore, if you offer advice or services to your client which are wrong, you could potentially be responsible to pay for losses arising as a result of this.
The cost of litigation
Many businesses underrate the real expense of legal action. The cost of defence could vary for different businesses. Many businesses – especially small businesses – would try hard to finance these costs.
Protecting your professional reputation
This indicates an amazing factor in professional indemnity – the often disregarded issue of reputation defence.
There can be an orientation in such legal cases for the professional involved to strive to resolve the case as rapidly as possible. While it may appear like the simplest solution, it’s essential to consider the long-term effect of this course of action. It can be an acceptance of guilt and have a destructive effect on your reputation.
Professional Indemnity insurance allows you to pursue legal avenues to clear your name and protect your reputation – with the help of a legal and insurance team.
When advice is your livelihood, the correct professional indemnity cover can provide peace of mind and security. But most importantly, it defends your valuable reputation.
What’s the difference between professional indemnity insurance and public liability insurance?
People often mix these two insurance types. But cover you for different things.
- Public liability insurance helps defend you against claims associated with injury, illness or property damage. For example, you inadvertently spill your cappuccino over a client’s laptop.
- Professional indemnity insurance protects you if a client claims your advice, work, ideas or designs led to them losing money or business. For example, your client makes a financial loss due to your advice.
What does professional indemnity insurance cover?
- Professional carelessness: If you give wrong advice or make an error.
- Defamation: If you make or support defamatory statements about your client.
- Breach of confidentiality: If you share confidential information without permission.
- Infringement of copyright: If you breach copyrights, trademarks or intellectual property.
- Lost or damaged documents: If you lose or harm documents while you are keeping them.
- Employee cover: If an employee brings about a loss for your client
Conditions of your cover
Professional indemnity cover is usually provided on a claims-made basis. This means that your insurer will only protect you for claims that are made against you during the term of your policy. If a claim is brought against you after your policy has expired – even if the incident happened while your policy was in place – you will not be covered for that claim.