Professional indemnity insurance

Compare quotes for professional indemnity cover 

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What’s professional indemnity insurance?

Professional indemnity (PI) insurance is business insurance that covers the cost of compensation claims and legal action if a client sues you for negligence or damages because you’ve made a mistake or been negligent in the work you’ve done for them.

What does professional indemnity insurance cover?

Professional indemnity insurance should cover the cost of compensating the claimant. That includes loss of earnings, future loss of earnings and the cost of repairing the damage.

You should make sure your policy covers your legal costs as well and any other damages that could be awarded to the claimant.

The types of risks your business might be exposed to include:

  • Professional negligence: If you give incorrect advice or make a mistake
  • Defamation: If you produce or support libel statements about your client
  • Confidentiality breaches: If you share sensitive information without permission
  • Breach of copyright: If you infringe on copyrights, trademarks or intellectual property
  • Lost or damaged documents: If you lose or damage documents while they’re in your care
  • Cover extends to your employees for all of the above, but the policy may specify a maximum number of employees
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Do I need professional indemnity insurance?

Professional indemnity insurance is usually for businesses that offer professional services or advice. For example, accountants, architects, journalists, solicitors or financial advisers.

It’ll cover you for making mistakes that lead to compensation claims from your clients.

If you’re a solicitor who incorrectly sent confidential information to the wrong person, or a journalist who’s accused of defamation, professional indemnity insurance can cover the cost a compensation claim.

Generally, you’ll need professional indemnity cover if you:

  1. Provide expertise, skills or advice to clients

  2. Have access to clients’ confidential information

  3. Produce materials that could infringe intellectual property rights

  4. Provide a professional service and could be challenged on your work

What’s the difference between professional indemnity insurance, public liability insurance and legal expenses cover?

Public liability insurance and professional indemnity insurance are both designed to cover the cost of compensation claims against you. But they each cover different types of compensation claims.

Public liability insurance usually covers compensation claims for bodily injuries to people or damage to their property.

Professional indemnity insurance covers you for making mistakes with the services you offer that have led to a client’s distress or financial loss.

Legal expenses cover is different again. It only pays your legal costs and any legal costs you’re ordered to pay. If you’re subsequently found to be liable and have to pay compensation, you would have to pay the compensation yourself.

That’s different to professional indemnity and public liability insurance where the legal costs plus compensation you’re liable for are covered.

How much professional indemnity insurance will I need?

It depends. The size and value of the contracts you take on makes a difference – you’ll want enough to cover your average contract value.

You might find your clients request particular insurance, and cover values, in their contract with you. If so, they’ll usually specify a minimum amount.

Generally, cover starts at around £50,000 but can go up to £5 million. If you’re not sure, ask a regulatory body for specific advice.

How much will my professional indemnity cover cost?

Insurers use lots of factors to calculate the cost of professional indemnity insurance including:

  1. The type of business you have

  2. Your turnover

  3. How many employees you have

  4. What kind of claims (if any) you’ve made, or had made against you, in the past

What should I consider before I buy professional indemnity insurance?

Here are a few questions to ask yourself when considering professional indemnity insurance:

  • are you a sole trader or limited company?
  • does your business deal with members of the public?
  • do you work with clients or customers?
  • do you handle data or intellectual property?

If you answer ‘yes’ to any of these, it might be worth comparing professional indemnity insurance. 

Frequently asked questions

Where you work doesn’t make a difference. As long as you are providing a service for clients, it’s worth considering - whether you do that from your home or site visits.

Yes, business insurance is an allowable expense, which means you can deduct the cost of professional indemnity insurance when you’re calculating your taxable profit.

It isn’t a legal requirement, but certain regulators and professional bodies might need your business to have professional indemnity insurance as a condition of membership – accountants and architects are just a couple of the professions which need it to meet industry standards.

Check whether it’s compulsory in your profession. You might find your clients need you to have it as part of your contract too.

You’ll need employers’ liability insurance if you have one or more employees. Public liability insurance can protect your business from third party claims, which is useful if you often work with the general public.

It’s not recommended. This is because professional indemnity insurance works on a ‘claims made’ basis, which means you need to have an active policy both when you did the work the claim relates to and when the claim was made against you.

For example, say you’re a contractor that had a project running from March to August, so you only take out professional indemnity cover for this period. The client makes a claim against you in September, but your short-term policy has lapsed, so you’re personally liable for the claim.

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