Professional Indemnity Insurance - Do You Need It?

What is professional indemnity insurance?

If you're looking for cover, you may come across technical terms like: 'indemnity', 'duty of care', 'claims made' and 'negligence'. But what if these terms mean absolutely nothing to you?

Let's start with the basics. What exactly is professional indemnity insurance?

It's all about negligence and protection. In simple terms, in business, your negligence can be thought of as a mistake you've made. Mistakes usually have some kind of fallout (for example, an unhappy client) and that's where the protection-for-you bit comes in.

As a professional if your client believes you've done something wrong, like given them bad advice, not delivered what you said you would or been careless with their confidential information, they're at liberty to sue you for any losses they sustain because of the alleged failure.

If they do decide to sue, it's then that a professional indemnity insurance policy kicks in. The legal costs of defending you and any damages awarded to your client are paid - up to the level of cover provided by your policy, of course. You get the problem resolved and, with any luck, get to keep your client too.

An important point to make is professional indemnity insurance is for genuine mistakes. Insurers tend to draw the line at paying claims caused by recklessness or promising something you can't deliver. Even if you have your own terms and conditions, it's advised you still have professional indemnity insurance. These days, customers are inclined to sue first and ask questions later - you don't actually need to do anything wrong to find yourself at the sharp end of some enthusiastic finger-pointing.

Not too long ago, professional indemnity insurance was taken up only by those who were required to have it by their professional bodies (accountants, solicitors and architects for example).

Things are a bit different nowadays and it's not just those who have to have professional indemnity that recognise its advantages. When problems arise, the knock-on effect of an increasingly litigious society means that disgruntled clients will often default to a sue-first-ask-questions-later approach to mediation.

And we're all familiar with the odious maxim: 'where there's blame there's a claim'. As a conscientious professional, it's important to protect yourself from all that nonsense. So, with that in mind, what's the answer? Who does need professional indemnity insurance?

If you consider yourself to be a professional, a specialist, an expert or authority in your field then the answer to this question is, you. A general rule of thumb is: if you offer advice, know-how, consultancy, design or other specialist services to your clients then you need professional indemnity insurance.

Why Use Professional Indemnity Insurance?

Nowadays people have understood that they have to be protected at all times and that there are benefits that professional indemnity insurance offers them. The problem is that there are many that still do not properly understand what professional indemnity insurance actually entitles them to. You are the only one responsible for always knowing what professional indemnity insurance offers in your case. By using professional indemnity insurance a business is covered against losses and lawsuits that sometimes tend to happen. The insurance will cover any negligence that comes from one of your employees and even from you. It is thus recommended for any business that has several employees or deals with jobs that cannot be monitored daily.

The great part about this type of insurance is the fact that you and your business are covered even after the services have been provided for the client. Always remember that the insurance is going to cover you on "claims-made basis". You never know what can happen so this is one aspect that should never be neglected. Also, whenever you change an insurer you might want to ask the old insurer to settle all the claims or the new one to cover retroactive claims. You should be patient whenever changing insurer because the entire process can be good enough.

On the whole we can say that professional indemnity insurance is perfect for any business owner out there to some degrees. All is based on your business and the dangers that are attached.

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