Do I Need Professional Indemnity Insurance (2024)

FAQs

Do I have to have professional indemnity insurance? ›

Professional indemnity insurance is not a legal requirement – but professionals who work in certain sectors should still consider it one of their core business needs. This is because some industries are much more likely to suffer service-based disputes than others.

In short, if you provide any service that is relied upon by other people or businesses, you may need professional indemnity insurance to protect you. In fact, not having Professional Indemnity Insurance often represents a very serious business risk.

How much professional indemnity cover you need will depend on the work you do, and the level of risk involved. Some factors to take into consideration include: Size of your business, usually including annual turnover. As your business grows you can extend the level of cover needed.

This type of insurance responds to claims of negligence, oversights, malpractice, or errors your clients allege you committed while providing your services. If a client, or a former client, thinks that your bad advice caused them financial or reputational damage, they may choose to sue you.

If there is no indemnification clause you are at a higher risk of liability when a dispute arises. Remember, your service contract is there to protect YOU. While all contracts should be somewhat two-sided and have clauses protecting the rights of your client, YOUR CONTRACT is mainly there to safeguard you.

While not required in every state for every profession, if you provide health-related professional services, maintaining malpractice coverage can reduce your financial risk. Doctors and nurses are often serving on the frontline of healthcare and must make critical decisions, which can leave them open to lawsuits.

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Based only on our experience, we recommend the following as a minimum guide: Sole Trader - Insure for at least four times fee income (£ 250,000 minimum) Limited Company - Insure for at least three times fee income (£ 500,000 minimum)

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Losses due to Prohibited Acts or Omissions: The policy does not cover losses caused by dishonest, fraudulent, criminal, or malicious acts or omissions.

What is the standard professional indemnity policy? ›

In Professional Indemnity Policy, the sum insured is referred to as Limit of Indemnity. This limit is fixed per accident and per policy period which is called Any One Accident (AOA) limit and Any One Year (AOY) limit respectively. The ratio of AOA limit to AOY limit can be chosen from the following: 1:1.

Professional liability insurance (PLI), also called professional indemnity insurance (PII) but more commonly known as errors & omissions (E&O) in the US, is a form of liability insurance which helps protect professional advising, consulting, and service-providing individuals and companies from bearing the full cost of ...

You must have PII if you're a solicitor in private practice. You'll need PII if you're working in-house for clients other than your employer if your work involves: providing commercial legal advice services. working at law centres, charities and other non-commercial advice services.

Special Considerations

Certain professionals are strongly advised to carry indemnity insurance. These professionals include those involved in financial and legal services, such as financial advisors, insurance agents, accountants, mortgage brokers, and attorneys.

Indemnification clauses appear in nearly all commercial agreements. They are an essential risk allocation tool between the parties, and as such, they are one of the most commonly and heavily negotiated provisions in a contract.

Any business that sells its expertise should consider professional liability insurance. Also known as errors and omissions (E&O) insurance, this coverage protects your company and your bottom line from customer claims of late, incomplete, or unsatisfactory work. Accusations like these can lead to costly lawsuits.