How much Professional Indemnity Insurance do I need
What is Professional Indemnity Insurance?
Professional Indemnity Insurance, also known as PI, can help to protect you if claims are brought against you by a client. Professional Indemnity Insurance will help to put mistakes right and cover any legal costs if a client is unhappy with your work.
What does indemnity mean?
Indemnity is an obligation by a person to provide compensation for a particular loss suffered by another person. Professional Indemnity Insurance provides cover to certain professionals or service providers who offer advice, expertise or services.
How much Professional Indemnity Insurance do I need?
When you buy insurance, whether it’s for your home, car or business, you’ll usually be asked how much cover you want or need.
For home or office insurance, that can be quite straight forward, it’s a matter of working out the cost of replacing your all your contents or items if they’ve been damaged or stolen.
But for Professional Indemnity Insurance, it can be harder to estimate how much cover you’ll need for your business. And because your business is unique, there’s no one-size-fits-all answer.
So, which limit should you choose? This is one of the most common questions asked and there are a number of ways to help you decide.
Check with your client
If you’re undertaking a contract for a specific customer, client or organisation, they may specify a minimum amount of indemnity cover required for you to undertake the contract. If they have, you can simply choose a level of cover that meets this requirement when buying your policy.
If they’ve specified that you need to have professional indemnity insurance but don’t state a limit, it may be worth checking with them how much they would consider acceptable before you buy.
Check with your industry body
If you’re a member of a professional industry body (common in professions such as accountancy, engineering, IT Consultancy and surveying) they may insist that you hold a minimum level of indemnity cover in order to be a registered member of their body.
Your membership agreement will usually state the minimum cover requirements but if you’re unable to find this or you’re unsure in any way, then it’s best to contact your industry body to clarify their requirements and ensure you have the required levels in place.
Choose your own levels of cover
If you simply want to choose your own levels of cover, there are a few things to consider when selecting Professional Indemnity Insurance and how much cover you may need:
- Rectification costs - In the event of a serious mistake you’ve made, the costs to rectify the problem can be very costly and could include fees and charges for a 3rd party to resolve the issue.
- The maximum compensation that could be awarded against you - This includes the compensation for any fees you were paid and any consequential losses your client incurs as a result of your mistake - for example, lost sales or missed business opportunities.
- Potential legal fees in the event of a court case - This is not only the costs to defend yourself, but also any legal fees incurred by your client in pursuing you. These costs combined can easily run into hundreds, if not thousands, of pounds
- Size of the contract and the size of the client - The larger the company the bigger the legal department and the greater potential for legal and financial recourse.
Protect yourself and your business
When business is going well it can be easy to ignore any situations where your customer is unhappy enough to sue. As a guideline, think about the value of the contract to you, as well as the complexity of the work involved. Consider the turnover of the business and your pay as a proportion of that turnover.
Calculating the right amount isn't an exact science, but getting it right is very important. Buy too much and you may waste some money, but buy too little and you risk under-insuring which could have disastrous consequences.
If you’re still unsure, call our specialist Professional Indemnity Insurance team on 0345 377 0002 and they will help you choose the cover you need and select the right insurance for your business.
Do I need Professional Indemnity Insurance?
For some professions or contracts, Professional Indemnity Insurance (PI) is a mandatory requirement. You may also be required to have Professional Indemnity Insurance to get membership with certain industry bodies and trade associations.
Do I need Liability Cover?
If your customers visit your premises, or you visit their offices or homes, then you may also need public liability insurance.
Liability insurance provides protection in the event of an accident or injury to your customers or members of the public, or damage to their property.
How can Lloyds Bank Business Insurance Services help you protect your business?
We know your business is important to you, and keeping it safe and secure will allow you to focus on the important day to day tasks.
To help you do this we have chosen to work with Arthur J. Gallagher Insurance Brokers Limited, one of the UK’s largest insurance brokers.
This service will provide you with access to specialist insurance advisors and a panel of leading insurers which means you can choose from a range of products to get the cover you need at the price you want.