What is professional indemnity insurance? insurance form review

What Is Professional Indemnity Insurance?

This article explains what professional indemnity insurance is, who needs it and what it covers.

This article is a definition of what professional indemnity insurance is in the UK, plus explain who needs it and what it covers.

Professional indemnity insurance definition

Professional Indemnity insurance covers your business against claims for financial and reputational damage. If you deal in intangible products, like advice or data, professional indemnity cover can make a real difference if things go wrong.

Who needs professional indemnity insurance?

The most common customers for indemnity insurance are professionals. It covers them if claims are made with regard to their advice or creative work, letting them do their jobs with more confidence.

What’s more, digital companies may look to professional indemnity cover in case of errors or false claims around data handling or copyright infringement.

Here’s who and where else indemnity insurance can help:

  • Traditional professional services that advise can benefit from liability limitation
  • Digital companies could be covered against losses caused by data breaches, or by issues with intellectual property
  • Some smaller businesses have for potential claims as they often have limited resources to fight a court case, even a spurious one.

What can professional indemnity cover?

Professional indemnity is for intangible products, such as advice, design, specification, software development, or data. In an increasingly knowledge-based economy it’s an important part of insurance cover.

For example:

  • If an accountant were to give advice in good faith, they might face a lawsuit for resulting losses if the advice turned out to be poor. Here this type of policy can help to cover her business
  • A company designs custom software for a certain purpose and the client claims it’s not up to standard. Professional indemnity would cover them where public and products liability wouldn’t
  • Even sending an email containing confidential information to the wrong recipient—the slip of a mouse—could result in a civil case. Again, you’d be covered.

Whatever your business, if you’re dealing with advice, software, data or other services, this type of insurance policy insures you if things go wrong with a client.

Tips for getting the best professional indemnity insurance cover for you

A successful claim for compensation can range from hundreds of pounds to far larger sums. In fact, some clients will state the value of the cover they look for as a condition of business, which will give you some guidance.

  • You should always be careful about the period of time for which you’re covered. You can choose a policy that covers you for actions taken during the policy and where the claim is also made during the cover. But you can also get retroactive cover for your past liabilities*.
  • You should also be careful about what is included in the policy. Some provide elements of cyber cover, others don’t.

*As long as you had a professional indemnity insurance policy in place

Another thing to look out for is whether your professional indemnity policy will cover legal costs as part of its claims settlement. And, of course, always check the excess that’s to be paid towards a claim.

Small Business Insurance

Last Updated: 25 Jan 2016