If your business gives advice, provides services or handles client information, professional indemnity insurance is worth considering. Even small mistakes can lead to claims, and defending them can be expensive whether you’re at fault or not.
This guide explains what professional indemnity insurance covers, who it’s for and what to look for in a policy.
What professional indemnity insurance covers
Professional indemnity insurance protects your business if a client claims they’ve suffered a financial loss because of your work.
That might involve allegations of negligence, errors, omissions, incorrect advice or breach of confidentiality. The policy can cover legal defence costs as well as compensation, up to an agreed limit.
It’s designed for situations where the issue isn’t physical damage or injury, but financial harm linked to professional services.
Who typically needs professional indemnity cover
This type of insurance is most relevant for businesses that offer advice, design, consultancy or specialist services.
It’s commonly used by:
- Consultants and coaches
- Accountants and financial advisers
- Architects and designers
- Marketing and IT professionals
In many industries, clients require proof of professional indemnity insurance before signing a contract.
What it doesn’t cover
Professional indemnity insurance doesn’t replace other forms of business cover.
It won’t usually cover:
- Employee injury, which falls under employer’s liability insurance
- Injury or property damage to the public, which falls under public liability insurance
- Deliberate wrongdoing
Understanding where the boundaries sit helps you build the right combination of policies.
Cover limits and policy terms
Policies come with different cover limits, often starting at £250,000 and going into the millions.
The right level depends on the size of contracts you take on and the potential financial impact of a mistake. If you work on high value projects, higher cover limits are usually sensible.
It’s also important to check whether the policy is claims made or occurrence based, as this affects how long you’re protected after work is completed.
What affects the cost
The cost of professional indemnity insurance depends on factors such as your industry, turnover, claims history and the level of cover you choose.
Higher risk sectors tend to pay more, especially where advice has significant financial consequences. Clear contracts and good record keeping can help reduce risk and keep premiums reasonable.
Why professional indemnity insurance matters
Even if you’re careful and experienced, disputes can happen. A client may feel something didn’t go as planned and look for compensation.
Professional indemnity insurance gives you protection and support if that happens. It helps cover legal costs and reduces the risk of a single claim damaging your business.
For many service based businesses, it’s not just a safeguard. It’s part of working professionally.
