If your agency or client has asked you to take out a professional indemnity insurance policy, but you’re unsure what this type of cover can provide you in practice, this beginners guide should help.
What is Professional Indemnity Insurance?
This type of insurance will protect you and your business in the event that a dissatisfied client makes a claim against you, which could be crippling financially as well as damaging to your reputation.
Here are some of the key areas which PI insurance is designed to cover:
- Negligence – where you have breached your duty of care to the client.
- Dishonesty – where you are found liable for stealing money from your client.
- Intellectual Property (IP) – for unintentionally breaching copyrights, trademarks and other rights.
- Loss of Data / Documents – where you lose important information belonging to your client.
How will my business be protected?
Professional indemnity insurance covers your contracting business in several ways:
1. You will be insured in the event that you make a mistake whilst providing professional services to a client, leading to a dispute. If the dispute gets nasty, your insurer will defend your claim – even if it goes to court. Subject to the level of cover you take out, your policy will also cover you for any damages you are found to be liable for.
2. Your policy will pay for the cost of fixing any mistakes you have made, potentially avoiding a larger claim being made.
3. If you mistakenly damage or lose a client’s data or documents, or you or one of your employees has been involved in the theft of a client’s money, your business will be covered.
4. Further benefits provided by specialist insurers include access to specialist legal defence teams and claims staff who understand how the contracting industry works, avoiding potentially crippling legal costs, and protecting your reputation as a professional contractor.
How much PI cover should I take out?
There is no strict rule governing what level of PI cover you need. Some clients will specify a minimum level of indemnity they require, depending on the exact nature of the work you will be carrying out. Many government departments require their contract workers to have at least £5m of cover in place.
Aside from any levels stipulated by your agency or client, our advice is to buy as much as your business can reasonably afford to pay for.
Retroactive / Run-off cover
Depending on your personal circumstances, you may want to cover yourself against claims for work carried out in the past (typically to the date when you started contracting). This is ‘retroactive’ cover. On the other hand, if you’re taking a career break, or retiring, you could benefit from taking out ‘run off’ cover.
You can find out more in our guide to retroactive and run-off PI cover here.
How to get a PI insurance quote
You can get a quote for business liability and PI insurance via our long-term partner, Qdos.