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Professional indemnity insurance

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What does professional indemnity insurance cover?

Professional indemnity insurance is a type of business insurance.

It helps protect you against the cost of being sued if your company financially damages a client.

Most policies cover damage due to:

  • Negligence on your part that damages a client financially or reputationally
  • Substandard work you produce that doesn’t meet standards agreed at the outset
  • Loss of data, documents or information you’re entrusted with
  • Unintentional copyright infringement that’s found to be your fault

Most policies will not cover damage due to:

  • Dishonesty and fraud, as intentional damage done to a client isn’t covered
  • Injuries or damage to property done to a client. Public liability insurance may cover you for this
  • Fines or penalties you incur as a result of illegal practises or those that go against a regulator’s rules
  • Intentional breach of confidentiality that damages a client

Does my business need professional indemnity insurance?

Unlike with other types of business insurance, there's no law stating that buisinesses have to have professional indemnity insurance

But some trade bodies and regulators insist their members have it in order to operate, so you may need it regardless of the law.

Professions where this applies include:

Solicitors: as the Solicitors Regulation Authority insists its members have at least £2-3 million of cover.

Architects: as the Royal Institute of British Architects requires all RIBA members to have cover.

Surveyors: as the Royal Institution of Chartered Surveyors require all members to have cover in place.

Construction management professionals: as the Chartered institute of building asks that all its members are fully covered.

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What our business insurance expert says

"Even if you don’t need it, professional indemnity insurance could save you a major headache down the line. Whether you work in tech, finance or something else entirely, things can - and do - go wrong. Having a safety net in place if they do can give you the peace of mind you need to do your best work, day in, day out."

What other types of cover might I need?

Other types of business insurance you might benefit from include:

Public liability insurance

If your business injures a member of the public, or damages their property, you could be sued. Public liability insurance helps you cover the cost of any compensation and legal fees you’re ordered to pay if your business is found to be at fault.

It isn’t a legal requirement, but as with professional indemnity insurance, some regulators and trade bodies may insist your business has it in place in order to operate.
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Employer's liability insurance

If an employee injures themselves on the job, your business could be held liable for medical fees, loss of earnings and more. Employers’ liability insurance helps you cover the cost of any claims your employees bring against your business.

It’s a legal requirement for most businesses with employees, and carries a heavy fine for business found without it. But there are exceptions.
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What affects the cost of my cover?

There are several factors that affect how much you pay for your professional indemnity insurance.

These include:

The size of your business, as the more clients you deal with, the higher the chance of something going wrong.

Your clients' turnover, as the more they make, the more damage you could do them if something were to go wrong.

The type of business you have, as some run a higher risk of damaging a client than others.

The amount of cover you take out, as the more your policy covers you for, the more you’ll pay for it. Professional indemnity insurance usually provides between £50,000 and £5 million of cover for your business.

Your claims history, as businesses who have claimed in the past are seen as riskier to insure.

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Who's Simply Business?

Our business quotes are powered by Simply Business, one of the UK's leading business insurance providers.

Since 2005, they've helped over 3 million small businesses find the right coverage at the right price. And like all our partners, they're authorised and regulated by the Financial Conduct Authority, ensuring they're honest, transparent, and trustworthy.

Get a quote today to see if you can save with Simply Business.

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Need more help with your professional indemnity insurance?

Will my policy cover past work?

This depends on the details of your policy. 

Professional indemnity insurance typically covers misconduct claims for work you do while your policy is active. This means that if a claim is brought against you for work done 6 months or even a year ago, as long as you were covered at the time, your policy should pay out. 

Some policies will also cover you ‘retroactively’. With retroactive cover, you’re covered for work you did in the past, even if you didn’t have insurance in place at the time. This can be useful as claims may not be brought against you for some time after the work you did was completed.

Policies with retroactive cover will normally come with a cut off period. Work done before this period will not be covered. They also tend to be more expensive than other policies, so bear this in mind.

Is it tax deductible?

Yes. Public indemnity insurance is classed as an ‘allowable expense’. This means it can be deducted from your costs when you calculate your taxable profit.

Other types of business insurance are tax-deductible too.

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Page last reviewed: 22/11/2023

Reviewed by: Matthew Harwood

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