Why do I need Professional Indemnity Insurance?
Professional Indemnity Insurance protects your business from potentially financially crippling and often reputation damaging claims from dissatisfied clients. Even the most respectable of companies can find themselves in dispute with clients over a claim resulting from bad or negligent advice or services.
If you offer your knowledge, skills or advice as part of your profession – either as a self-employed individual or for a company – you should consider taking out professional indemnity insurance.
Some professions are required to have professional indemnity insurance by their professional bodies or regulators – these include:
- chartered surveyors
- financial advisers
- some healthcare professionals
Many other businesses choose to take out professional indemnity insurance to protect themselves against claims – these include:
- advertising agencies
- design agencies
- public relations agencies
What is Professional Indemnity Insurance?
Professional indemnity insurance protects you against claims for loss or damage made by clients or third parties as a result of the impact of negligent services you provided or negligent advice you offered.
Compensation claims can be brought against you even if you provided a service or offered advice for free.
Professional indemnity cover is usually offered on a claims-made basis. This means that your insurer will only cover you for claims that are brought against you during the term of your policy. If a claim is made against you after your policy has expired – even if the incident occurred while your policy was in place – you will not be covered for that claim.
For example, if an incident occurred in 2011 when you had professional indemnity cover, but the client brings a claim against you in 2012 – after your policy has expired – your insurer will not cover you for that claim.
If you cancel your professional indemnity insurance, for example if you are retiring or changing professions, you should consider purchasing a run-off policy. This covers you for any new claims that are brought against you after your professional indemnity insurance has expired.
New claims can be brought against you for up to six years after an alleged negligent act occurred, so your run-off policy should cover you for this period.
If you are changing insurer, a run-off policy will protect you against new claims for incidents that occurred when you were with your previous insurer. Alternatively, your new insurer may agree to cover you for claims relating to prior incidents.
Check if your new insurer covers you for claims relating to previous incidents, or ask about buying a run-off policy.