Professional Indemnity Insurance; What Is It and What Can It Do for My Business?
Professional indemnity (PI) insurance can cover a broad range of potential risks. Even though things that seem to be small errors can be hugely expensive for you and your business. But with the help of a professional indemnity insurance, it can safeguard your business. Companies that commonly need professional indemnity insurance are; architect firms, recruitment agency, consultancy firms, accounting practices, and much more.
But what exactly can PI protect you from? How do you know you are in breach of it? What service do I need to do to get a PI insurance policy? In this blog, we will be answering any questions you may have about your policy.
What does PI Insurance Cover?
Professional Indemnity insurance can cover you for claims for financial damage arising from negligence, error or omission, misstatement or misrepresentation which you are alleged to have committed while providing a professional service. Along with standard cover for errors and omissions, PI policies often include cover for:
- Loss of documents in a variety of physical or electronic formats
- Accidental release of confidential information about clients
- Accidentally saying or writing something which is deemed defamatory or damaging to character or reputation
- Unintentional use of third-party copyrighted images, texts or designs
- Dishonest acts of employees
- Professional negligence
- Any form of invasion of privacy and breach of confidence Professional Indemnity policies can also cover:
- Court attendance compensation
- Acquisitions and previous businesses
- Awards by Ombudsmen
- Claims brought against principals
- Public relations and crisis management services
What Do I Need to do to Need PI Insurance?
If you are a company that is either advising or consulting your clients on something, you need to have a PI policy. Here are some companies who need professional indemnity insurance;
- Advertising and Marketing
- Software development
- IT services
- Acting as an intermediary or agent
- Services requiring qualifications and training, e.g. solicitors, accountants and surveyors
- Safety consultants
- Training specialists
What Issues Can Be Covered By the Policy?
There are many things that could come under your PI insurance policy that you need to be protected for. If you’re not sure when you might need professional indemnity insurance, here are just a few examples:
- A website hosting company accidentally deletes a client’s website
- An architect specifies inappropriate building materials
- An IT firm corrupts important files while installing software
- An advertising agency includes the wrong phone number in a client ad
- One of your employees posts confidential client information online
- An accountant uses an out of date tax form leading to underpayment
- A business consultant’s advice leads to legal issues, fines or loss of business
- A direct marketing firm mails out incorrect or defamatory information
- A logistics firm directs deliveries to the wrong addresses
- A marketing firm suggests a brand name that means something bad
Is PI insurance just one more expense I can do without?
There is no law that says you have to buy PI insurance – although quite often now clients will require you to have it before they’ll take you on.
So you could see it as an avoidable expense.
But a better way of looking at it is as an investment in the future of your business. Business disputes can and do happen every day – and they can be both expensive and time-consuming.
Knowing you have appropriate PI cover in place saves worry, wasted time, and damage to the business brand you’ve worked hard to build. Before you pass up on PI insurance, be sure you can afford to fight a legal action from your own resources. As well as saving sleepless nights, PI insurance can play a positive role. By underlining your credibility, security and professionalism – and the fact that you take your responsibilities seriously – it acts as a marketing asset. It’s something more and more clients look for in their professional service providers, with many large businesses, councils and government departments rejecting tenders from firms that don’t have PI insurance in place.
As with any other type of business insurance, it’s important to make sure you have sufficient cover in place and not risk being under-insured.
That means looking at the type and scale of projects you handle, the industries and markets you work in, the size of clients you work with, and the possible financial impact of a worst-case-scenario claim. Ask yourself this: what’s the worst that could happen, who might sue me, and how much for? Take that number and add the costs of hiring solicitors to defend you and investigating claim incidents.
If you want to discuss your Professional Indemnity Insurance with one of our brokers, contact us on 0207 537 6603 or fill out our contact form. Our brokers have access to a wide range of different markets to get you the best possible quote for your insurance policy.
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