What is Professional Indemnity insurance?

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Professional Indemnity Insurance (PI) – is a type of business insurance that will cover the costs of your legal defence and any appropriate rectification costs (the costs of making a mistake right) if a client you have done work for takes legal action against you for a financial loss they have suffered due to an alleged mistake or negligence in the work you have produced for them.

Is PI insurance a mandatory requirement?

Unlike Employer’s Liability Insurance, Professional Indemnity Insurance is not a legal requirement. Yet it is often stipulated as a mandatory requirement for members of professional bodies and by some regulators. PI Insurance is usually required by contractors before they can be deemed eligible to undertake a client’s contract for work.

Do I need PI insurance?

Many professionals will need this type of insurance in order to join their respective professional bodies. Some clients may demand that their freelancers and contractors have professional liability insurance to cover the value of your work.

You could be liable for thousands of pounds if you offer advice or a service which leads to your client losing money.

If you undertake any of the following business activities, you should consider carrying professional indemnity insurance to ensure you and your client are protected:

Offering advice or professional services to clients as a freelance contractor or consultant.
Providing designs as an architect or engineer.
If a client requests that you take out professional liability insurance.
If you are part of an industry regulator or professional body that requires a minimum level of insurance cover to be a member.

What does PI insurance cover?

PI Insurance provides cover for legal costs and expenses incurred in defending a claim, as well as compensation and costs that may be awarded due to:

Professional Negligence including making a mistake on a client project or providing them with poor advice that causes them to lose money as a result.
Defamation and libel including making false comments about a client or competitor which causes damage to their reputation.
Loss of data or documents.
Loss of goods or money for which you are responsible.
Unintentional breach of copyright including using an image on your website or other marketing without permission.
Unintentional breach of confidentiality including sharing sensitive information without consent.

What limit of indemnity do I need?

The limit of indemnity you need will depend on the work you do and the level of risk. Some factors to take into consideration include:

Size of your business, usually including annual turnover.
Size of the contracts you work on.
Potential legal costs you could face.

As your business grows you can extend the level of cover needed.

If you need professional indemnity insurance for a specific contract, it is typical for the minimum amount of PI insurance required to be stated in the contract. Also, this is often the case for regulatory and professional bodies, so it is important to check the minimum insurance you need before arranging cover.

Looking for a quote or more information about PI insurance?

You can find out more about PI Insurance by calling our friendly team on 0333 321 1403. Caunce O’Hara are experts for professional indemnity insurance for freelancers and contractors and our team will be happy to help you with any questions you have.