If a customer or client could claim that a business or professional’s mistake or negligence cost them money, they could sue. This is why professional indemnity (PI) insurance is so important. It can help cover the costs of lawyers to defend against these types of claims, whether they are valid or frivolous. According to the professional indemnity insurance page by NimbleFins, PI insurance can also cover amounts that a business or professional is found liable to pay their client or customer to cover any real or even perceived losses.
But which businesses should really consider having this type of business insurance? A business can need PI insurance to protect themselves financially and also because it might be required by clients, regulatory bodies or professional organisations.
Businesses that might need PI insurance
A business or sole trader that provides advice, designs, knowledge, skills or professional services should strongly consider professional indemnity insurance, as they might need it. If a mistake or negligence could result in a cost to a client, for example, a mistake in a blueprint for a house, then PI insurance would be needed to help cover the costs of a legal team and any payments required to be made to the client. Without PI insurance, the business or professional would have to cover these costs themselves. With legal costs alone likely to reach into the thousands of pounds for even a simple case, PI insurance can be incredibly valuable.
PI insurance can apply to a wide range of industries and job functions. Architects, accountants, consultants and construction workers are just some of the many industries that should consider professional indemnity insurance. Professionals in many occupations would be especially wise to purchase professional indemnity insurance, including but not limited to:
- Financial advisors
- Insurance brokers
- IT specialists
- Healthcare professionals
- Architects
- Accountants
- Solicitors
- Planning and surveyors
- Engineers
- Risk management
- Consultants
- Design and construction
- Interior designers
- Coaching, training and education
In addition, other industries give professional advice. They should consider the premium, such as PR agencies, advertising agencies, marketing agencies, business analysts, freelancers, event managers, mortgage brokers, recruiters, security consultants, software developers, tradesmen, writers.
But it’s not just the industry but the work performed that can dictate whether or not PI insurance would be a good idea. Here are some examples of work that can be covered by professional indemnity insurance:
- Giving expert advice regarding professional services
- Handling sensitive data for a client
- Creative work that is subject to scrutiny over quality or vision, such as an interior design
In addition, a business might need professional indemnity insurance to satisfy a client contract, win business or meet the requirements of a regulatory body or professional organisation. So, in addition to PI insurance just being good plain business sense for those exposed to certain kinds of risks, PI insurance might be required in the following situations:
- If a business works in a space regulated by an industry regulatory body that requires professional indemnity insurance in order to do business
- If a business is a member of an industry professional organisation that requires professional indemnity insurance as part of the terms of membership
- If a business has a client who insists on professional indemnity insurance as part of the contract terms
For example, financial professionals may need PI insurance as dictated by the FCA, and solicitors may need professional indemnity insurance to adhere to SRA rules.
Getting Advice
While ultimately it is up to a business to decide whether or not they need professional indemnity insurance, a business can get help deciding whether or not they do by contacting a specialist broker or certain insurance companies. Of course, the amount of advice they can give might be variable. Still, an insurance professional can certainly assist a business by asking the right questions and getting a feel for the type of work carried out by a business.
Note, a broker or other insurance specialist will not tell a business exactly how much cover it needs. But, again, they can assist a business by asking the right questions (e.g. How much are the biggest client contracts worth? How much could a mistake cost a client?).