NOT another boring insurance post… time to learn what Professional Indemnity Insurance actually is…
Am I the only one that finds all the different types of insurance confusing? You can get insurance for almost anything these days; phones, pet, health, home, possessions, cars, bike, travel, payment protection… the list goes on. If you are starting a business or considering consulting of some kind, then unfortunately insurance is definitely something you need to get familiar with!
What is Professional Indemnity Insurance?
You have probably all seen a heap of posts on other blogs about insurance and perhaps even professional indemnity insurance, but I am willing to bet you still couldn’t explain what it actually is! As with many insurance types, not many people actually know what it covers you for/against and the different situations where it could be helpful. Perhaps the common perception of insurance is that it is not required; that is, until something goes wrong!
Professional Indemnity Insurance is an insurance to protect against claims of negligence that are filed against you in a professional manner. For example: If I was a financial advisor or solicitor (NOTE I do not offer professional financial advice and all content is for entertainment purposes only… see my Disclaimer page) and advised a client (i.e. I charged them for the advice) to invest in a certain stock or gave them advice that directly led to financial troubles, I could have a potential lawsuit on my hands. Professional Indemnity Insurance would protect against this. The cover is by no means limited to advice – negligence claims in a professional manner can be filed under countless circumstances. From poorly designed accounting software to a custom designed part or building; providing my services led to a financial loss, I could be sued.
Professional Indemnity Insurance is most vital to those who deal in professional services and advice; most often solicitors, accountancy, writers, consultants and financial service providers – although a huge amount of companies providing a professional service can find that they should have had a good PI policy. As much as we can make a broad list of the types of services that certainly do need and tend to apply for PI, the need for PI insurance should be explored on a company-by-company basis. In some cases PI is even compulsory – government contracts and similar deals will require such assurances. In some cases, professional indemnity insurance is a prerequisite before even going into business, never mind being awarded a contract. Again, this all depends on the field or service that you are doing business in.
Professional Indemnity cover also protects you against defamation of character, copyright infringement, libel or loss of data.
The other thing to bare in mind when considering taking out cover is that a lawsuit could potentially be filed against you in years to come. Just because the advice or work that you do today seems OK – it doesn’t mean that it won’t cause problems in the future. Architects and Engineers in particular have a long ‘grace period’ to be wary of!
Insurance is Often Worth the Price
A quick comparison of the cost of a Professional Indemnity Insurance policy set against the value of the potential law suits and pay-outs should force home the necessity of PI. A company like Endsleigh offers cover starting from around £5 a month, and their policies range in protection from £50,000 to £2million. The value of protected cover might come as a surprise to you – inadequate Professional Indemnity Insurance can be financially ruinous!
Let’s be honest, at this price it would be a bit irresponsible not to right?
Confession Time: Has anyone ever had any claims made against them, or do you know somebody who has? What was the result?
Thankfully I haven’t had to deal with this issue, but I appreciate the insights about this type of insurance! I’d definitely look into options if I were in a line of work where it would make sense.
The Happy Homeowner recently posted..Creative Valentine’s Day Gifts on a Budget….and a Giveaway!
Anytime mate 🙂
I haven’t had to deal with it either! But think you for the information!
Holly@ClubThrifty recently posted..My Credit Score: Why I Don’t Care and You Shouldn’t Either
Good post, I have to carry professional indemnity insurance because I am an active PADI DiveMaster. That’s not my day job but even assisting a dive instructor exposes me to potential liability, luckily the dive shop I work with has a shop policy that I can get coverage through and save some money. I think what many people do not realize is that there are many occupations that have potential liability other than the most obvious (Doctors, Lawyers, etc).
Jose recently posted..Do You Have An Asset Protection Strategy In Place?
I am a Rescue Diver… soon to be a DM!! 🙂 I hadn’t thought about these circumstances until now… very good point Jose!
Interesting topic – as you say not heard much at all about this type of insurance. While it doesn’t apply to me currently still worth knowing. Thanks.
Jamie Dickinson @ YourSavingAngels recently posted..Wedding on a Budget
Any time! 🙂
A good post, and one I have a professional interest in. Personally I define PI as covering against negligence leading to a loss from use of a service, which differentiates it from public or products liability insurance which is more “physical”. With certain trades such as alarm fitting, it can rapidly get very complicated depending on how exactly the loss occurs, as all 3 could apply in different circumstances.
As an example, if you take people on a dive, you will need public liability cover first and foremost, the PI aspect applies when advice you give or teach is incorrect.
Nicely defined sir! PI insurance is something people usually realise the importance of when they need it – i.e. when it is too late!