Professional Indemnity Insurance 101: All you need to know

In recent years, countless small businesses and consultants offering specialist knowledge, advice, and skills have found success. From life coaches to SEO agencies, the business possibilities seem endless.

However, providing this kind of service entails certain risks.

Anyone can make a mistake. Most are easily fixed. But if a mistake proves detrimental to one of your clients, leading to bodily harm, financial losses, or damage to their reputation, it can be fatal for your business.

According to recent statistics, 75% of small business owners worry that making such professional mistakes could cost them their business.

This is where professional indemnity insurance (PII) comes in.

What is Professional Indemnity Insurance?

This type of insurance covers claims brought against you because of perceived non-performance, breach of duty of care, or professional negligence.

Basically, if someone sues you for a mistake you made – from using someone else’s intellectual property to giving bad business advice – PII has your back.

It will cover your legal expenses, including your defence if the claim is taken to court, no matter if it’s justified or not. If you lose your case and you have to pay compensation to a client, PII usually covers this as well.

PII shouldn’t be confused with public liability insurance. This type of insurance covers any claims relating to injuries and physical damage caused by your business – for example, if a client breaks an arm tripping over loose floorboards in your office.

Who Needs PII?

Currently, over 500 different occupations in the UK can purchase professional indemnity insurance. These range from traditional occupations like estate agents and solicitors to newer professions like marketing agencies and life coaches.

Generally, you should get PII if your business provides expert advice and consultancy, or if you have access to confidential information that might get mishandled by mistake. The same is true if your niche leaves you exposed to claims of professional negligence. This especially applies to sensitive sectors like fitness, nutrition, health, and first aid.

Similarly, if you think you might face disputes over the quality of your work and vision, or claims related to copyright infringement and intellectual property, PII is an asset. This is particularly relevant for graphic designers, architects, media agencies, writers, and journalists.

In addition, PII is mandatory for some professions, like accountants, financial consultants, engineers, and healthcare professionals. This is regulated by their respective industry bodies.

Finally, it’s also important to note that an increasing number of clients will require proof of PII before going into business with you.

What Does PII Cost?

How much exactly PII will cost depends on the policy you want to take out and the sort of business you run.

The higher and broader you want your cover to be, the larger your business is, and the more sensitive your industry, the more expensive PII will be. It also depends on your own credentials. If you have experience and qualifications relevant to your niche, your PII rates are likely to be lower.

Monthly costs for PII can tally in at as little as £10, though it’s not at all unusual to pay several hundred or even well over a thousand pounds in a high-stakes industry.

The easiest way to find out how much you’d pay for PII is to contact a few different insurance providers and spend some time comparing offers, including the fine print

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