Guide To Professional Indemnity Insurance: Who Needs PI Insurance?

If you own a business where you’re regularly dealing with other businesses and organisations and you make an error, you could be liable for the damage your advice/services has caused. Making mistakes is natural and human, but sometimes these mistakes can lead to consequences that could harm your business. Professional indemnity or PI insurance can help to remove the anxiety from you doing your job.

Being a business owner, it’s important that you safeguard your professional reputation and financial stability. When it comes to businesses who offer advice or other services to the public, if you make a mistake there is the risk of facing claims of negligence, errors or omissions. This is where professional indemnity insurance comes in, to protect you from the financial repercussions that could be costly. 

If your business or charity regularly deals with the different trades and you’re not sure if you need this cover, then you’re in luck! In this blog from East Yorkshire Insurance Brokers we answer all your questions from ‘who needs PI insurance?’ To, ‘what does professional indemnity insurance cover?’ So you can make sure that you’re properly protected.

Don’t let the fear of making mistakes prevent you from reaching your goals. Professional indemnity insurance can provide you with the peace of mind you need, to grow your business confidently. Let’s take a look at: what is PI insurance so you can make sure you protect your business.

What Is PI Insurance?

So, what is PI insurance? Professional indemnity insurance is crucial for businesses who provide advice or services to clients. This is a type of cover for companies and consultants to protect you from the financial repercussions that can come from claims of negligence, errors or omissions that may be made against you as a result of the services you provide. If you’re accused of either providing negligent services or poor advice then this can be costly for your business, having this cover in place will ensure that if a mistake is made, your business can withstand the potential financial impacts from legal actions.

From accountants to architects, if your business requires you to give advice or provide services you could be sued if the client is unhappy with the work received. You could be accused of being negligent or of making a mistake that has cost them money. Anyone can make or be accused of making an error, by having PI insurance in place this will make sure if such mistakes occur, you’re financially prepared. 

Why Do You Need PI Insurance?

Professional indemnity insurance is beneficial for many businesses dealing with the public. No matter how experienced and diligent you may be, mistakes can happen to anyone, and if you face misunderstandings, they can lead to disputes that could be costly for your business. No matter how big or small your business may be, even the slightest error could lead to significant financial loss, legal disputes and even damage to your reputation if clients hold you accountable for any failure on your behalf of your professional duties. 

By having PI insurance in place, this will act as a safety net, covering the legal fees and compensation costs that come from any claims of negligence, errors or omissions in your professional services. Not only will having professional indemnity insurance in place will make sure you are financially covered, but it will also give you peace of mind, allowing you to focus on your work without the fear of making a mistake. Therefore, by investing in professional indemnity insurance you can be confident knowing that you’re shielded from the unforeseen risks that come with your chosen profession.

What Does Professional Indemnity Insurance Cover?

When arranging PI insurance one of the most commonly asked questions is: what does professional indemnity insurance cover? PI insurance protects your business against a range of potential risks that can arise from the services or advice that your business offers. 

The risk of making a mistake can apply to anyone, and while some are minor and may cause no financial consequence, some can be detrimental to your business if you don’t have adequate PI insurance in place. Although, what professional indemnity insurance covers will depend on the policy purchased, here are some of the areas that PI insurance typically covers:

Professional negligence or errors

When asking the question: what does professional indemnity insurance cover? One of the primary aspects of this insurance is cover for negligence or errors and omissions. If you make a mistake in the work you provide, or you fail to meet the expected standards of your profession, and this results in a client suffering a loss, then PI insurance can cover the costs associated with any claims or compensation.

Breach of professional duty or trust

PI insurance also protects against claims related to a breach of professional duty or trust. This could include situations where you fail to act in the best interest of your client or violate the terms of your professional relationship, leading to financial loss or damage to your client’s interests.

Misrepresentation or misleading advice

If you provide incorrect or misleading advice, this can have serious consequences for your clients, potentially leading to them suffering from financial loss. PI insurance covers claims that arise from misrepresentation, ensuring that you’re protected from the financial repercussions if your advice is challenged or results in unforeseen negative outcomes.

Libel or slander

Reputational damage can happen easily, and if your business is accused of making defamatory statements whether that’s written (libel) or spoken (slander), having PI insurance in place will cover the costs of defending against claims made against you.

Civil liability

PI insurance also includes a general civil liability, which covers a broader range of potential claims than the typical negligence or errors cover. Civil liability will also cover your business in cases where you’re held liable for a loss, without being found negligent.

Defence costs

Legal disputes can be expensive, even if the claim against you is unfounded. Having PI insurance in place will cover the defence costs associated with any claims such as legal fees, providing financial support to defend your reputation and business.

Intellectual property infringement

If you are accused of infringing on intellectual property rights such as using copyrighted materials, trademarks or patents without permission, PI insurance can cover the legal costs and potential damages associated with these claims, safeguarding your business from costly disputes.

Who Needs PI Insurance?

There are many businesses where professional indemnity insurance is critical. For those that provide services or advice it is crucial that they have PI insurance in place to financially protect themselves from the risks they will face when performing their professional duties.

PI Insurance For Accountants

Since accountants handle sensitive financial information and are responsible for ensuring compliance with tax laws, financial regulations and accurate financial reporting, even a small mistake can lead to significant financial repercussions for their clients. PI insurance for accountants is crucial to cover claims of negligence, errors and omissions.

PI Insurance For Architects

Because architects are involved in designing buildings and structures, even a minor error in plans can result in costly construction issues or safety hazards. PI insurance for architects protects you if your client loses money because of negligence in your services or advice.

PI Insurance For Estate Agents

Normally estate agents handle large financial transactions and provide advice relating to property sales, purchases and valuations. If a client believes they received misleading advice or if a mistake in the paperwork leads to financial loss, PI insurance for estate agents can offer protection against potential claims, safeguarding your reputation and business.

PI Insurance For Solicitors

As a solicitor you often provide legal advice and representation, and if you happen to make an oversight that leads to legal or financial consequences for your client, you could be accused of negligence and providing misleading advice. PI insurance for solicitors will protect you from crippling legal costs that can occur as a result of claims of negligence, errors in legal documents or breach of duty.

PI Insurance For Engineers 

If you’re a structural engineer, you need professional indemnity insurance since you are responsible for ensuring the safety and stability of buildings and other structures. If you make an error in calculations, design or materials specifications this can have extremely serious consequences and potentially lead to structural failures. PI insurance for engineers will protect you from the costs of claims related to professional negligence, so you can relax knowing you’re covered if an incident occurs.

What Is Included In PI Insurance 

When it comes to Professional Indemnity Insurance, understanding the sums insured is crucial. The policy specifies a limit of indemnity, which is the maximum amount insurers will pay for loss resulting from each claim. This can either be ‘any one claim’ (which means that the number of claims covered during the policy period is unlimited), or ‘aggregate’ (which is where the financial cover provided is limited to the amount in the policy) for all claims made during the policy period.

Additionally, insurers will usually cover defence costs on top of the loss. However, if the loss exceeds the limit of indemnity, the amount contributed towards defence costs will be proportionate to the limit of indemnity relative to the loss. It’s also important to note that the policy may include a retroactive date, which indicates the earliest date from which work is covered. This date is clearly shown on your policy schedule. Depending on the nature of your trade, the policy may come with a higher excess, which is the amount you’ll need to pay towards a claim before the insurance kicks in. For professionals working outside the UK, it’s essential to ensure that your policy includes coverage for activities conducted abroad, as different jurisdictions may have varying legal requirements.

Choose EYIB For Professional Indemnity Insurance

At East Yorkshire Insurance Brokers, we understand the importance of receiving the right coverage, and how the consequences of not being properly protected can have devastating effects on your business. With our industry experience, choosing us ensures that you receive the cover your profession needs, whether you’re looking for PI insurance for accountants, solicitors or engineers. We will talk you through your options and provide with our expert advice, so you can be confident your business is protected, every time.

Do you need professional indemnity insurance? Don’t put your business at risk and contact us today for the cover you need!

PI Insurance FAQs

What is the difference between public liability and professional indemnity insurance?

What sets public liability and professional indemnity insurance apart is that public liability covers third party property damage. Whereas professional indemnity insurance covers third party financial losses following an error or omission.

Who would need professional indemnity insurance?

Any business that provides professional services or advice to clients needs PI insurance, in case you happen to make any mistakes or errors in your work that could potentially lead to any claims of negligence, PI insurance will make sure you’re financially protected.

Can I work without professional indemnity insurance?

While it’s not a legal requirement to have professional indemnity insurance, it’s common for clients to require this insurance for any professionals working for them. Therefore, if you don’t have PI insurance, you may be limited to what projects you can work on. However for sectors like solicitors and insurance brokers, PI insurance is a compulsory requirement.

What does professional indemnity insurance not cover?

PI insurance doesn’t cover claims from the third parties for injuries or damages. To ensure full protection, it’s important to consider additional policies such as public liability insurance and employers’ liability insurance. These policies cover other risks, like third-party injuries and employee-related claims, providing comprehensive coverage alongside your PI insurance.