Understanding Professional Indemnity Insurance: What Is It & Who Needs It?
Of all the different types of business insurance cover available for business owners today, professional indemnity insurance may be one of the most complicated policies on the surface. But with just a bit of research and communication with your insurance broker or business financial consultants, you’ll find that professional indemnity insurance is actually quite simple – and just as vital for a large majority of businesses operating today.
To shed some more light on this particular insurance cover and the business risks that it aids in mitigating, we’ll be answering some of the more frequently asked questions surrounding professional indemnity insurance, alongside outlining the top industries or enterprises that would benefit from securing this insurance cover to safeguard their company, staff, and operational processes.
Read on to learn everything you need to know about professional indemnity insurance.
What is professional indemnity insurance?
Professional indemnity insurance is effectively a type of liability insurance that’s designed to protect businesses in the event that claims of negligence or breach of duty is made against that organisation or any of its staff. Professional indemnity insurance is designed to provide cover for any financial losses to clients or customers that are a direct result of negligence, operational errors, or harmful false statements made by representatives from your organisation.
If a client or customer takes legal action against your organisation, the costs associated with defending your case can be substantial. This is where professional indemnity insurance can be highly valuable, both for covering legal fees as well as covering additional costs that may be incurred by redistributing company time and energy for the same of responding to legal action.
What does professional indemnity insurance cover?
As we mentioned, professional indemnity insurance helps to protect your company in the event that it’s found liable for negligence, error, or breach of duty. For this reason, standard professional indemnity insurance policies typically covers costs incurred due to:
- corporate negligence (i.e. misplacement of client belongings, files, sensitive information, etc.)
- defamation,
- breach of duty,
- breach of privacy/confidentiality, and
- intellectual property infringement claims made against your company.
Professional indemnity insurance will also cover expenses resulting from conducting investigations into claims made against your company, as well as any costs resulting from defending or settling claims made against your company.
Some professional indemnity insurance policies may also cover the costs of securing public relations consultants for the purpose of repairing your company’s reputation following any claims made against you.
Professional indemnity insurance extras
When it comes to policy add-ons, professional indemnity insurance can usually be packaged with public liability insurance for businesses that could benefit from securing both types of business insurance cover. Public liability insurance is designed to protect your business from financial losses in the event that a customer, client, or member of the public is injured on your business premises or as a direct result of actions taken by representatives of your organisation.
What isn’t covered by professional indemnity insurance?
Alongside understanding what professional indemnity insurance covers, it’s also vital for business owners to know what professional indemnity insurance doesn’t cover. Professional indemnity insurance typically won’t cover:
- Financial losses resulting from maintaining contractual obligations
- Claims made against your business as a result of your business filing for bankruptcy or insolvency
- Claims that were known or originated prior to the commencement of your policy period
- Any damage or losses that were caused intentionally
Top industries that may take out professional indemnity insurance
Professional indemnity insurance is guaranteed to be a valuable business investment for companies that operate within service industries, or industries that provide services instead of producing goods. This can include industries like:
- Accounting and bookkeeping
- Architecture and engineering
- Legal and financial consulting services
- ICT, telecommunications, and other technical services
- Teaching and training consulting services
- Migration agents and travel services
- Manufacturing and fabrication services
- Real estate and property management services
- Body corporation services
- Plumbing and electrical services
- Healthcare services
It’s also important to note that some of these industries may also be able to secure indemnity insurance policies that are tailored to their sectors. For instance, ICT specialists can secure cyber liability insurance, and healthcare workers can be covered by medical indemnity insurance taken out by the hospitals or clinics they’re employed by.
Many small business owners also take out professional indemnity insurance policies that are tailored specifically for small businesses. This can include businesses operating within the hospitality and retail sectors. If you think that your business may benefit from securing professional indemnity insurance cover, then we strongly recommend you look into the insurance policies that are available to you.
How to secure professional indemnity insurance for your business
Securing professional indemnity insurance for your business isn’t dissimilar to securing home and contents insurance or even car insurance. All of these processes start the same way: by researching the policies and insurance providers available to you.
Once you’ve created a shortlist of providers, all that’s left to do is communicate with these insurance companies to secure a policy or insurance package that caters to your company’s insurance needs. Be sure to compare the premiums provided by all your shortlisted providers in order to find a policy that provides you with the best value.
It’s also recommended that business owners revisit their professional indemnity insurance policy during every policy renewal period, or when your contract is about to end. This period of time is generally considered to be the best opportunity for you to find better coverage with competing providers or broker a more cost-effective deal with your current insurance provider.
However, so long as you maintain a strong understanding of this insurance type and your company’s own professional indemnity insurance policy, you should be able to reap all the benefits of securing this vital cover on behalf of your business, staff, and valued customers.
