Professional indemnity insurance

Professional indemnity insurance is an important type of business insurance. If your business gives professional advice to clients, then PI covers you in case your clients claim a service is inadequate. Also known as PI insurance, it may also cover compensation claims if a client sues as a result of financial loss after advice your business gave, or mishandled data.

The information below will help tell you what is covered and what isn't covered when you take out a PI insurance policy:

Am I covered against?
Defamation*
Bodily injury*
Consequential loss*
Breach of contract*

Professional indemnity insurance will usually provide anywhere between £50,000 and £5 million of cover for your business.

*Bodily injury is covered under third party compensation, but only if it is caused by your negligence in performing your professional duties.

*Consequential loss is sometimes covered under professional indemnity insurance, but there will usually be some exclusions. We recommend checking the details of your policy carefully.

*Defamation is normally covered in a policy. Again, we recommend checking your policy details to be sure.

*Breach of contract, you won't be covered for breach of contract in your policy.

If your business offers advice, a professional service or handles client data or intellectual property, then the chances are you'll need professional indemnity insurance. It may be the case that certain regulators and professional bodies require their members to have PI insurance. This can apply to the following groups:

• Solicitors
• Accountants
• Financial advisers
• Chartered surveyors
• Accountants
• Certain healthcare professionals

Unlike business insurance, professional indemnity insurance isn't a legal requirement for all businesses.

Professional indemnity insurance covers a wide range of businesses, from architects to accountants, but certain contracts may require you to get PI insurance as part of the job.

Professional indemnity insurance usually provides between £50,000 and £5 million of cover for your business.

It completely depends on the level of cover your business needs. Some businesses, usually larger ones, will need a larger amount of cover which will cost more. You're better off checking contracts beforehand to get the most accurate quote possible.

Just as an example, some businesses regulated by the Financial Conduct Authority (FCA) are required to have more than £1 million of cover for PI insurance.

If your business has a regulator or is part of a professional body, they may advise how much cover you should take out.

When you take a new contract with a client, they might also specify how much cover you're likely to need. You could also calculate how much cover you'll need by working out the compensation demand if something were to go wrong during the contract.

It's important to remember that these are minimum amounts, and your business may decide it wants a higher level of professional indemnity insurance.

Both professional indemnity and public liability insurance are types of business insurance, and they are both designed to cover any compensation claims that your business may get from clients. The differences between the two are what types of compensation you're covered to claim against.

Professional indemnity insurance:

• Covers you for compensation claims from clients due to mistakes in your work
• These mistakes could include defamation, loss of data or documents, professional negligence, or unintentional breaches of copyright
• It is mainly used by businesses that provide a professional service or offer advice to clients

Public liability insurance:

Most businesses will find this insurance useful as it covers you against members of the public.

• Can cover you for injury and property damage compensation claims made against your business
• Covers you against legal fees associated with the injury or property damage compensation
• Claims made through public liability insurance will cover you against members of the public, which can include clients, customers, suppliers or passersby
• This type of business insurance is common with the retail sector and tradespeople

• Public liability insurance

  Public liability insurance provides cover if a member of the public injures themselves or makes a claim against your business. For example, someone slipping and injuring themselves if there is a spillage on the floor but no wet floor sign.

• Employers liability insurance

  Employers liability insurance protects you, your business and your employees, if a member of staff makes a claim. For example, a member of staff falling off scaffolding, or an office employee tripping over a cable and breaking their wrist.

• Product liability insurance

  Product liability insurance can protect your business if a customer makes a claim against a faulty product you've made. For example, if you're a manufacturer and a customer makes a claim after purchasing a product from you that doesn't work properly.