Professional indemnity insurance | Liability insurance | Business insurance | ABI (2024)

FAQs

What is business professional indemnity insurance? ›

Professional Indemnity Insurance protects you and your business against claims for alleged negligence or breach of duty arising from an act, error or omission in the performance of professional services.

Professional Indemnity Insurance can only be added to your policy if you purchase either Public Liability Insurance or Buildings and Contents Insurance. Professional Indemnity Insurance isn't available to professions that must have compulsory or regulated policy cover.

Professional indemnity insurance covers the cost of compensating clients for loss or damage resulting from negligent services or advice provided by a business or an individual.

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)

For example, if a client disputes work you have undertaken for them – perhaps it could be financial advice given by an accountant leading to the customer suffering financial loss – Professional Indemnity Insurance can cover the cost of defending the claim.

In addition to psychologists, PI insurance is a mandatory requirement for many other allied health professionals, including chiropractors, occupational therapists and physiotherapists.

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.

Information you should provide

The date of your first awareness. The identity of the potential claimant and any other parties involved. A brief outline of the problem and your views on liability. An indication of the potential financial value of the claim.

A letter of indemnity (LOI) is a legal agreement that renders one or both parties to a contract harmless in case of delinquency or breach of a contract. The party or parties are indemnified against a possible loss by some third party, such as an insurance company.

What Does Indemnity Insurance Not Cover? Claims covered by your general liability policy, such as third-person bodily injury or property damage, are not covered by indemnity insurance. Always review your policy for your specific coverage and exclusions.

How is professional indemnity calculated? ›

The key rating factors used to calculator your professional indemnity premium. Your occupation is a key rating factor. In simple terms, the greater the perceived risk of your occupation, the higher the premium will be. This 'risk' that we refer to, is based on an insurer's claims experience for your industry.

PII premiums typically range between 3% and 9% of law firms' annual turnover, with a median value of 5%.

The amount of PI cover your business needs will depend on the nature of your work and the type of clients you service. If you work with large organisations in heavily regulated industries, then your professional indemnity requirements are likely to be higher.

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: 1:3.

Indemnity insurance is a type of insurance policy where the insurance company guarantees compensation for losses or damages sustained by a policyholder. Indemnity insurance is designed to protect professionals and business owners when found to be at fault for a specific event such as misjudgment.

While professional indemnity insurance is essentially a legal liability cover, it also covers other related expenses that the insured may incur in the course of their defense. These could also include damages or losses awarded to the third party.

Professional Indemnity and/or Civil Liability Insurance: Protects against claims from clients due to actual or alleged negligent acts, errors, and/or omissions. This policy covers damages (if awarded against you) and the costs of legal defence and claim mitigation expenses.