What is professional indemnity insurance?

Is professional indemnity insurance the same as business insurance?

‘Business insurance’ is a general expression, which covers multiple insurance products. These include:

  • employers’ liability insurance
  • public liability insurance
  • professional indemnity insurance

Public liability insurance protects your business in the event you are sued by a member of the public for injury or damage caused by your business operations.

Employers’ liability insurance protects your business in the event you are sued by an employee or former employee for an illness or injury sustained while working for you.

It is a legal requirement to have employers’ liability insurance if you employ anyone.

What is professional indemnity insurance?

It protects your business if you are successfully sued (you don’t only have to be successfully sued for the policy to pay out) because recommendations or advice you provided have resulted in financial loss for a client.

What types of businesses need professional indemnity insurance?

It is common for businesses providing advice and professional services, such as architects or solicitors, to have this type of insurance. However, any business which provides recommendations or advice should consider it. That may include builders and those in the construction industry.

Is professional indemnity insurance a legal requirement?

It is not normally a legal requirement. However, we would always recommend that you have it if you are providing the relevant types of services.

The cost of a claim against you may amount to hundreds or thousands of pounds. This can be crippling for a small business to pay.

Many trade associations and professional bodies require their members to have professional indemnity insurance. You may also find that some organisations will not do business with you if you don’t have it.

What happens if I am not insured?

If you are contractually required to have professional indemnity insurance, you will be in breach of contract if you don’t have it or fail to renew it. This will entitle the other party to terminate the contract. They may even be able to claim for breach of contract against you.

You could also find yourself having to pay legal fees, compensation, and damages if someone successfully sues you.