A Professional Indemnity (PI) insurance policy can also be known as errors and omissions insurance (E&O), and it provides coverage that protects professionals and businesses against financial losses arising from claims of negligence, errors, or omissions in the performance of professional services. This insurance is particularly relevant for individuals and companies that provide professional advice, services or expertise to clients.
Who needs Professional Indemnity Insurance?
Professionals who offer advice in services in areas such as law, medicine, consulting, engineering, architecture, and accounting should consider professional indemnity insurance. In many sectors and / or jurisdictions, regulators require professionals like doctors, lawyers, and financial advisors to have professional liability insurance coverage to operate legally. Freelancers and small business owners in service industries can also benefit from this protection as if bad advice is given or a mistake is made you can be held liable.
Without this cover, professionals may be personally liable for any claims, which could lead to significant financial losses.
Why you need Professional Indemnity Insurance?
The provision of professional advice or services can lead to claims for compensation if any financial loss has been suffered as a result of alleged negligence, errors or omissions. Professional indemnity coverage can provide crucial protection by covering legal defence costs, lost income, and any compensation awarded if a claim is successful.
What Professional Indemnity Insurance Covers
A professional indemnity insurance policy can provide cover for defence costs, compensation payments, and the cost of investigating claims. This type of professional liability coverage is often tailored to the specific risks faced by different industries. Sovereign Insurance Services work with leading insurance companies to ensure you receive the best possible cover for your needs. This insurance is vital for protecting your business from financial losses arising from mistakes or faulty advice provided during professional services.
Medical Malpractice
Medical malpractice refers to professional negligence by healthcare providers, resulting in substandard treatment, harm, or injury to a patient. To protect against the financial repercussions of such claims, medical professionals should consider obtaining medical malpractice insurance. This specialised form of malpractice insurance provides essential liability coverage for legal costs, settlements, and judgments that may arise from lawsuits related to patient care. By securing adequate liability coverage, healthcare providers can safeguard their practice against potentially devastating financial losses while ensuring that they can effectively defend themselves against claims of malpractice.
Period of Cover
Policies are usually arranged on a “Claims Made” basis, covering claims that are made and reported during the policy period , regardless of when the incident occurred. This is different from policies that cover events that happen during the policy period, known as “occurrence-based” policies.
However, in many countries, it is possible to take action against suppliers many years later; for example, up to 6 years in the UK. Many professionals opt for policies that include retroactive cover, which protects them from claims arising from past work. This can be especially useful for industries where professional negligence claims might emerge years after the services have been provided.
As with all professional liability insurance policies, cover varies significantly by insurer and by jurisdiction, so we recommend that you seek our professional advice to ensure that you are fully protected at all times. Sovereign Insurance Services can help you compare policies, including the specific limits, exclusions, and coverage limits that match your business needs. Whether you’re a small business owner, independent contractor, or managing a larger firm, we can help you find the right solution.
Frequently Asked Questions
How much does professional indemnity insurance cost?
The cost of professional indemnity insurance depends on your industry, level of risk, and coverage required. We can help you find an affordable policy that meets your business needs.
Is professional indemnity insurance mandatory?
In some professions and jurisdictions, professional indemnity insurance is mandatory. For example, solicitors, accountants, and architects are often required by their regulatory bodies to have PI insurance before practising. It’s important to check the requirements for your industry to ensure compliance. In some jurisdictions it is a legal requirement to have this cover in place, so check the local laws.
What is the difference between professional indemnity insurance and public liability insurance?
Professional indemnity insurance covers claims arising from professional advice, services, or expertise you provide. In contrast, general liability insurance protects against claims from third parties for injuries or property damage caused by your business activities. Both types of insurance are important, but they cover different risks.
How much professional indemnity insurance do I need?
The level of professional indemnity insurance you need depends on your profession, the size of your business, and the potential financial impact of a claim. For example, professionals working on high-value contracts or those in high-risk industries may require higher coverage limits. We recommend speaking to an insurance expert to determine the right level of cover for your business.
What happens if I don’t have professional indemnity insurance?
If you provide professional services without professional liability insurance coverage, you could be personally liable for any claims made against you. This could result in significant financial losses, as you would need to cover the costs of legal defence and compensation out of pocket. In some regulated professions, not having PI insurance could also result in penalties or suspension from practice.
Does professional indemnity insurance cover past work?
Yes, many professional indemnity insurance policies can include retroactive cover, which protects you against claims arising from services you provided before the start of your policy. However, it’s essential to check the details of your policy to ensure it includes this protection.
