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As a professional, your clients hold you to certain standards and expectations. It’s important they understand exactly what you intend to deliver for them - and that you meet these agreements. However, if a client perceived that their business was in some way damaged by your actual or alleged professional negligence, they could potentially sue you for damages.
Luckily, there is insurance for professionals to protect against incidents such as those described above. It’s called professional indemnity (PI) insurance. Keep reading to learn more.
Professional Indemnity (PI) insurance* is a form of protection for businesses that provide specialist services or professional advice. It is designed to help cover the cost of claims against your business for losses as a result of actual or alleged negligent acts or omissions in the provision of your professional service or advice. PI Insurance can also assist with the legal costs associated with responding to or managing claims which are covered by the policy.
In some cases it may even extend to PR expenses required to manage your reputation.
There are a range of professional indemnity insurance products on the market, which all vary slightly1. However, a typical policy will generally cover for:
It’s important to review the policy wording and product disclosure statement for policy limitations and exclusions.
Like every type of insurance, there’s no set cost for professional indemnity insurance, and your monthly premium can vary depending on a variety of factors.
So, how is cost calculated? There are a few key factors that can affect your policy price and understanding them can give you a better idea about what to expect. Let’s take a closer look at some of the biggest factors:
If you’re an independent contractor, or you just look after a handful of employees, your insurance may cost less than someone with a multinational business or lots of employees. This is because larger firms tend to face more complex risk issues, and financial consequences are usually more significant.
Your yearly revenue can play a part in determining the cost of professional indemnity insurance. Businesses that turn over a high value will likely have to pay more than smaller businesses that generate less revenue.
Certain industries have benchmarks that dictate the level of cover that’s suitable (and in some cases are mandatory). When you apply for a professional indemnity policy, the insurance provider will assess your industry, your role, and the level of risks involved. They’ll also look at the estimated value of any claims made against you.
Insurers will usually take your claims history into account when establishing a quote. If you have a previous history of making a claim, this could increase your premium.
While some professionals aren’t given an option about the level of cover that’s required to operate, others do have a choice. You could ask yourself some of the following questions to start getting an idea of policy inclusions that may be relevant to you:
Professional indemnity insurance was once reserved for particular industries, such as law, accountancy and healthcare. Nowadays, a much wider range of professionals consider professional indemnity insurance while it is even compulsory for certain occupations.
If it’s not mandatory for your occupation, it may still be worthwhile assessing whether it’s appropriate for you. Because, although you might do your best to deliver a high-standard of work to all your clients, mistakes can still happen.
These mistakes can cause financial loss or damage to your client which they could seek to claim from you, as well as hefty legal fees and could damage your reputation. Taking out professional indemnity insurance can provide you access to the funds needed to cover those fees, pay out compensation, and protect the name of your business – subject to the exclusions and limits of your individual policy.
In short, not having appropriate cover could cost your business, as well as its reputation.
Professional indemnity can provide that much needed peace of mind when working for clients. With iSelect & BizCover you can easily compare business insurance policies online from a range of providers, and you can select the one which suits you.
* As with any insurance, cover will be subject to the terms, conditions and exclusions contained in the policy wording or Product Disclosure Statement. The information set out above is general only and should not be relied upon as advice.