Professional Indemnity Insurance Guide

As a freelance consultant you want all your contracts to gosmoothly and your clients to be happy with your work. In return, youhope they will pay you on time & engage your services on a regularbasis. Sometimes however events can take a turn for the worse. Errorsmay unintentionally creep into your work, resulting in financial lossto your clients and a potentially ruinous liability claim being madeagainst you. Professional indemnity insurance protects you & yourbusiness against such claims.

Who needs professional indemnity insurance?

Anyonewho takes a fee for providing 'advice' that a client relies upon isconsidered a 'professional'. By law, 'professionals' owe their clientsa legal duty of care, if this duty is breached by a negligent actionfor example, clients can claim compensation for losses and damagescaused by one's negligence.

Professionslike Accountants, Lawyers, Architects, Surveyors and Medicalprofessionals all legally require professional indemnity insurance totrade. In recent years its also become common for freelancers workingin a wide range of industries like IT, Engineering, Design& Business Consulting to maintain policies, largely because clientsnow insist on PI cover being in place before they award contracts. 

How does professional indemnity insurance protect you?  

Professionalindemnity insurance covers you against legal costs that may arise as aresult of a client filing a lawsuit against you due to negligentactions. Even if the allegations are untrue you still need to defendyourself and the legal costs can be crippling. Without adequateinsurance your business and even your home could be put on theline. A professional indemnity policy safeguards you against thesecosts providing legal power to fight your status and reputation. If youare held liable, the policy will also cover any compensation payments.

How much professional indemnity insurance should you buy?

Asa business owner, no-one knows their business and its risks better thanyou. A lot of clients will have mandatory limits of indemnity in theirterms of business with you. Other assignments may require you to make ajudgement based on how hazardous or litigious the sector is. Also, ifyour responsible for big projects & sign offs you may want toconsider a higher level of cover. The best advice is to buy as muchcover as you can reasonably afford as if you are involved in alawsuite, the last thing you need is to be underinsured whereby yourlegal fees exceed your level of cover.