If you have a venture that offers professional services to your clients, it is highly reccomended to take out a professional indemnity cover. Professional indemnity cover is designed to help protect yourself from claims made by clients. Some companies may ask for a professional indemnity cover before hiring a person.
What is professional indemnity cover?
Professional liability insurance protects you from claims made by clients not satisfied with your services. The insurance covers legal expenses and costs and compensation awarded to the client. A client may demand payment if they believe that professional advice led to a financial loss or reputational damage. It is not a legal requirement, but it is a sensible cover to take if you provide professional services. This policy can save you lots of money and time spent defending a claim.
Why do you need professional indemnity cover?
Professional liability is popular small business insurance cover for firms that handle professional services. Here are some reasons for needing indemnity cover.
• You are a consultant. In case of a mistake resulting from following your advice, a client may claim compensation.
• Provision of expert services if you make an error in the designs, plans or calculation the client may sue.
• You handle sensitive information. Accidental disclosure or violation of the client’s legal rights might result in a lawsuit and compensation if the information disclosed ruined their reputation.
• Contract requirement. Some clients insist on the professional indemnity cover before they can hire your services.
• A requirement by your professional body. Most professionals belong to a professional body that regulates how they carry out their business operations. Some professional bodies insist on professional liability cover.
What type of work does professional liability cover?
You may require professional insurance if your business deals with:
a) Consultation and training services
b) Software development
c) Planning and design services
d) Legal and accounting services
What does a professional indemnity insurance cover?
Professional indemnity insurance provides cover for a wide range of scenarios.
1. Breach of professional duty
Failure to adhere to the duty of care toward clients like giving incorrect advice or errors in your work can result in a claim. The policy also covers Employees’ dishonesty and malicious acts. It includes theft and disclosure of private information concerning a client.
2. Loss or damage to documents
It includes documents lost in the post or stolen from the business premises. It also covers expenses incurred in recovering those documents.
3. Libel or slander
Losses caused by something you say or write about the client that tarnishes the client’s public image.
4. Violation of property rights
It includes an imitation or passing off another persons’ product as your own unintentionally. It covers infringement of intellectual property rights, copyrights, and trademarks.
How much cover do I need?
The amount of cover you require may depend on the industry requirements or your client. If you are the sole determinant of your cover then consider the following factors:
• The value of contracts and projects you handle
• Size of clients. When working for a prominent client take a more extensive cover because in case of a claim they are likely to demand a hefty compensation.
• The local authority may put in place a prerequisite level of cover to be allowed to work on a project.
• In case of a legal suit, how much compensation would the clients claim and how much money you will spend to defend yourself?
• In case of a claim will your business incur the cost and remain operational.
Most insurers have a wide range of policies, and they will allow you to select a cover that is suitable for you. The cheapest cover goes for£50000 while larger firms can take larger policies of up to £5 million.
What is ‘Any one claim’ and ‘aggregate policy’?
‘Any one claim’ and ‘aggregate’ refer to a basis of cover on PI policy. An ‘Any one claim’ offers cover for each claim while ‘aggregate policy’ offers cover for all claims made in the period of insurance. Any one claim provides a more comprehensive option.
What does ‘claims made’ mean?
A ‘claims made’ policy covers claims notified to the insurance company within the duration of insurance. Therefore, as long as the wrongful act took place during the period of insurance, it will be covered. However, if the policy is no longer operational, the claim will not be covered by the policy irrespective when the wrongful act took place.
‘Claims occurring’ policy offers cover for claims made during the period of insurance. Professional indemnity policies are not written on this basis.
What is run-off cover?
Most professional indemnity policies run on claims made basis making you liable for claims from past clients after your PI insurance policy has ended. Run-off cover is a protection against such eventuality.
What is a retroactive insurance cover?
A retroactive PI cover is a choice to include past work within the policy. When you have been operating a business without a professional indemnity in place, this retroactive cover will consist of that period. Therefore, in case of a claim, the insurer will still cover the cost of the claim. Insurance companies usually put a retroactive date, Such that work done before that date will not be included.