Professional Indemnity Insurance

During the course of their normal operations, many businesses are involved in providing services, advice and recommendations to their customers.

You only need to think of solicitors, accountants, architects, engineers, management consultants, and many others, to appreciate that the services being sold are founded on the professional knowledge and competence of the firms involved.

But what happens if that professional advice directly result’s in financial loss or damage to the customer concerned?

What is professional indemnity insurance?

What is professional indemnity insurance?

Professional indemnity insurance recognises that however careful and meticulous a professional may have been in offering advice and guidance, mistakes may be made. And those mistakes and errors may result in the client suffering loss or damage.

In that event, the client might allege professional negligence on the part of the provider – a mistake or error which would not reasonably have been made by a similarly qualified and knowledgeable professional.

Professional indemnity insurance is designed to protect your business from claims such as this – so that when you are ordered to pay a substantial sum by way of compensation, your insurance has that amount covered.

What does it typically cover?

What does it typically cover?

Professional indemnity insurance policies differ in the scope and nature of the cover offered.

Typically, though, the cover is designed to meet the legal costs and expenses you may incur in defending any allegation of professional negligence, together with any amount you are ordered to pay your client in order to rectify your mistake.

Some of the typical mistakes and errors for which you may be held professionally negligent might include:

  • giving mistaken advice or making errors in designs, drawings or recommendations;
  • the loss of documents or data belonging to your client;
  • unintentional breaches of confidentiality or copyright;
  • libel and defamation; and
  • the loss of money or goods – whether these are your own or the property of your client for which you are responsible.

Who is professional indemnity insurance suitable for?

Who is professional indemnity insurance suitable for?

In most cases, there is no legal requirement for any business to hold professional indemnity insurance.

However, membership of certain professions – notably, lawyers, accountants, architects, engineers and surveyors – is conditional on your having the prescribed level of professional indemnity insurance.

Even when insurance is not a condition of your membership of a professional association, however, you may find that some clients expect you to have such protection and you might fail to win certain contracts if you do not have it.

As well as being a valuable line of defence for your business, therefore, your having arranged professional indemnity insurance may underline the status, standing and seriousness with which you intend to do business.



Even when professional indemnity insurance is not mandatory for your particular line of business, it provides an invaluable defence against allegations of professional negligence if you happen to make an important mistake or error of judgment which results in a financial loss for your client.

By indicating to potential clients that you hold this form of cover, you may also be demonstrating the professionalism with which you intend to deliver your services or advice – and this in itself may help you to secure more contracts than otherwise.

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