What is Professional Indemnity Insurance?
Professional Indemnity Insurance is an important type of cover for a business, however it is particularly relevant to those in professions which provide advice for a living. A professional can be anyone who "provides advice or services of a skillful character according to an established discipline". A claim for compensation as a result of incorrect professional advice or services, whether your business is big or small, can set back your business severely.
Defining Professional Indemnity Insurance
Professional Indemnity Insurance covers against claims for liabilities owed to a third party (typically a client of the insured) for the loss suffered by the third party arising out of the insured providing ‘professional services’. To ‘indemnify’ means to cover the insured for the liability owed to the third party for the loss suffered. Professional Indemnity Insurance therefore is a type of insurance which can protect your business, for example against claims for financial loss, or bodily/personal injury and/or property damage that arise from an act, error or omission in the performance of the professional services covered by the policy.
For example incorrect designs made by an architect, incorrect advice provided by a migration agent with respect to visa requirements, failure to detect unsafe work conditions by a work, health & safety consultant can all result in a financial loss or bodily injury to a client, and therefore result in a potential claim for compensation against the insured.
Why is Professional Indemnity Insurance important?
On occasion it’s possible in your profession to unintentionally breach privacy or confidentiality, omit information, make an error of judgement or provide the wrong advice. A simple act, error or omission can lead to a claim against your business, therefore making it vital to protect yourself, your business, and reputation.
Professional Indemnity Insurance is important as the legal costs associated with defending any claims can be significant. Court and other legal fees to defend your business are often underestimated, and small businesses in particular can struggle to find the money to pay for this, regardless if they are found liable or not for damages. Court cases can also drag on for extended periods of time, with ongoing fees over years which can have a significant financial impact on your business.
Professional Indemnity Insurance is important as it can protect you from bearing the full cost of these claims. This can allow you to keep your business up and running as normal, without too many disruptions to your normal operations.
Who needs Professional Indemnity Insurance?
Professionals such as lawyers, accountants, bookkeepers, architects, engineers and marketing specialists are a few of the professions where Indemnity Insurance can apply. Professions that have more hands-on jobs are less likely to need Professional Indemnity Insurance, however it can still apply in some cases. For example, agricultural consultants, event managers, life coaches and marriage celebrants.
Whatever industry you work in, as a Professional in that industry, you hold the responsibility that your advice or services is of quality. Therefore if you provide advice or services to your client which are incorrect, you could potentially be liable to pay for losses occurring as a result of this.
Regardless of your profession or the size of your business, Professional Indemnity Insurance provides businesses with the peace of mind to keep working confidently. You can find some more information about Indemnity Insurance on our website here.
Protect your professional reputation, your business and your livelihood with the right cover. For more information regarding Professional Indemnity Insurance, contact CGU today.