Professional Indemnity Insurance (PI) helps professionals and businesses (whether small or large) to recover financially from an incident where their client loses money because of their work – and takes civil legal action against them.
It covers legal defence fees and compensation payments. For professionals that provide advice and services (Architects) or handle sensitive data and intellectual property (Solicitors), it can offer peace of mind as long as the cover is correct.
Here’s your quick guide to PI insurance by CORE PI Brokers Courtprice Limited.
What is and why have professional indemnity insurance?
A piece of bad advice, faulty service or negligence at work can sometimes cost a client a significant amount of money. If this happens, a client can lay a claim against you for their losses and inconvenience, and you will need to pay for legal defence and any necessary compensation if you lose. Professional indemnity Insurance (PI Insurance) is the type of liability insurance policy specifically designed to cover these fees.
Errors could be big – for example, a flawed architectural design that requires a client to take down part of a building and fully reconstruct it. They could be small errors and easily made – like a marketer making a typo on flyers that then require reprints. In the event of being sued, these professionals need to pay a solicitor to defend them in court.
“The Architects Registration Board recommend that the minimum limit of indemnity provided by PI Insurance should be £250,000 for each and every claim.”
The purpose of PI Insurance is to protect you against financial loss resulting from such claims of negligence or malpractice. Mistakes can happen much more easily in our complex, digital world, and a tiny error could quickly lead to severe consequences. No matter how careful you are, mistakes can slip through. These won’t always be costly, but if you are in an Industry, such as Construction, where they can be, having PI insurance can help you operate with more confidence.
What is covered?
PI Insurance is offered by specialist insurance brokers, very often creating a custom policy that meets your specific needs. Like any form of insurance, professionals or businesses pay a premium in exchange for the required level of cover and make a claim if needed.
PI Insurance covers legal fees and compensation payments if a client sues you. Compensation payments can include covering financial loss, personal injury or property damage caused by you.
PI Insurance claim amounts can differ drastically, depending on the severity and cost of the error.
Policies differ, but this insurance generally protects against advice, service or designs that display any of the below. Importantly, these mistakes need to have been unintentional and include:
- Negligence or breach of duty: When a professional does not act with the required standard of duty and care
- Errors and omissions: When a professional make a mistake, or fails to include a piece of information, which incurs unnecessary costs to rectify
- Breach of data protection and copyright: When a professional unlawfully gathers, uses or shares sensitive data
- Breach of confidentiality: When a professional discloses sensitive, business-critical information to third parties without consent, resulting in business or financial loss
- Defamation: When a professional makes a false statement about a client, painting them in a negative light that directly costs them business
- Loss of documents: When a professional loses important or sensitive documents, putting the client at risk.
Who needs PI Insurance and how much does it cost?
Any sole trader, partnership or limited company can benefit from PI Insurance if a mistake could have a costly impact on a client. This definitely includes those who offer specialist advice, services or designs, or those who deal with data and intellectual property including
- Chartered surveyors
- Advertising professionals (marketers, designers, copywriters, photographers etc.)
- Business consultants
- Public relations professionals
- IT service providers
- Recruitment consultants
- Interior designers
Like most insurance products, the cost of your PI policy largely depends on your circumstances. Because each industry and potential mishap is so different, there’s no one-size-fits-all policy.
CORE PI process is simple; understand the profession, understand the exposure, understand each risk and tailor terms accordingly.
Typically, insurers calculate the cost based on a number of factors which include:
- your type of profession (architect, technologist, interior designer)
- the type of work you undertake (i. your last five largest projects)
- your annual turnover (including fee income)
- number of employees
- any previous claims you may have had
A specialist broker should be able to help you determine the level of PI Insurance cover you need. If you undertake professional work, whether through a partnership or company or as a sole trader, as an employee or in a private capacity, you should ensure your work is covered by sufficient liability insurance.