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Professional indemnity insurance

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What is professional indemnity insurance?

Professional indemnity insurance protects you against the cost of being sued if your company financially damages a client.

This could be due to mistakes you make, bad advice you give or negligence on your part.

If you give advice, provide a service or skill, or handle sensitive client data, it's best to have professional indemnity insurance in place.

Do I need professional indemnity insurance?

It’s not a legal requirement, but trade bodies or regulators for some professions might insist on you having professional indemnity insurance. You may also find that some clients will need you to have a certain level of professional indemnity insurance if you sign a contract with them.

Even if you’re not required to have professional insurance by a trade body or under the terms of a client contract, it’s a good idea to have it if you’re giving advice to clients, providing them with a service, or handling their data/ intellectual property.

Here’s some of the professions where professional indemnity insurance tends to be a must:

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

What does professional indemnity insurance cover?

Professional indemnity insurance protects you and your business against the cost of compensation and legal fees if a client makes a claim against you.

Mistakes covered by PI insurance can include:

  • Negligence, if you give incorrect advice or make a mistake
  • Unintentional infringement of confidentiality, if you breach confidentiality rules
  • Copyright infringement,if you infringe on copyright, trademarks or intellectual property
  • Loss of documents or data, if you lose sensitive files

Small errors can lead to big losses for clients. As the level of compensation awarded by a court tends to depend on how much a client loses, compensation payouts can quickly become expensive.

Even if you’re not required to take out professional indemnity insurance by your trade body or under the terms of a contract with a client, you could be very glad of it.

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How much professional indemnity insurance do I need?

If you’re part of a regulated industry, or in a profession like an architect with a trade body, you’ll usually be told how much professional indemnity insurance you need as a minimum.

For example, according to the Solicitors Regulation Authority, solicitors must be insured for single claims of least £2 million.

Some contracts you have may also require you to have a minimum level of cover, so check these to ensure you take out the right amount.

You could also try to estimate the amount of cover you need yourself by looking at how much the contracts you’re working with are worth, and how much a reasonable compensation pay-out might be.

How much does professional indemnity insurance cost?

How much professional indemnity insurance costs will depend on the level of cover your business needs. The higher the level of cover, the greater your premiums will tend to be.

According to our partner Simply Business, professional indemnity insurance will usually provide your business with between £50,000 and £5 million of cover.

Some businesses, usually larger ones, will need a larger amount of cover which will cost more.

get a quote now to see exactly how much you're likely to pay for cover.

Do I legally have to have professional indemnity insurance?

It’s not a legal requirement to have professional indemnity insurance.

But regulatory bodies, trade associations or your clients may require you to have cover in place.

While you won't be breaking the law by not having professional indemnity insurance, you might be breaking the terms of a contract.

What other types of business insurance do I need?

Alongside professional indemnity insurance, there are a few other types of business insurance it might be a good idea to have in place.

These include:

  • 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 on a wet floor where there’s no warning sign.
  • Employers liability insurance protects you, your business and your employees, if a member of staff makes a claim. For example, this could be if they fall off scaffolding or trip over a cable and get injured.

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