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Professional Indemnity explained: Why do I need it?

Professional Indemnity explained: Why do I need it?

Professional Indemnity coverage provides you and your business with protection against claims for financial loss, bodily/personal injury or property damage arising from an act, error or omission in the performance of professional services covered by the policy.

If you’re in any kind of profession that gives advice or provides a service, for example: advertising agencies, management consultants or consulting engineers, professional indemnity is a necessity. Your business is your livelihood, so protecting it is paramount.

If an error or omission occurs in the course of your work and that error or omission causes a financial loss or injury to your client or any other third party, then they can claim damages against you, resulting in you incurring potentially debilitating costs (including legal costs) and reputational damage, causing a potentially significant disruption to your business.

Professional Indemnity Insurance protects you from bearing the full cost of these claims and disputes, and the time and resources they consume.

The cost of litigation

Many businesses underestimate the real cost of legal action. The cost for a defence could be around the $100,000 mark - or much more. Many businesses – especially small businesses – would struggle to fund these costs.

For example, a case handled by CGU saw a professional involved in a lawsuit that extended to $1 million in legal fees alone over several years.

His insurance premium covered all associated costs and the case was handled by the company. More importantly, he was proven not to have been negligent.

Protecting your professional reputation

This illustrates an important factor in professional indemnity – the often overlooked issue of reputation defence.

There can be a tendency in such legal cases for the professional involved to try to settle the case as quickly as possible. While it may seem like the easiest solution, it’s important to consider the long-term impact of this course of action. It can be seen as an admission of guilt and have a devastating effect on your reputation.

Professional indemnity insurance enables you to pursue legal avenues to clear your name and defend your reputation – with the backing of a legal and insurance team.

When advice is your livelihood, the right professional indemnity cover can offer peace of mind, security and most importantly, protect your valuable reputation.


This advice is general only and the protection provided will vary from policy to policy. Consult a professional insurance adviser for advice specific to your personal circumstances.

CGU provides Professional Indemnity insurance which can be tailored to your business needs, regardless of type or size. Find an adviser or get a quote today.

To find an adviser near you visit the CGU Find an Adviser Service at http://www.cgu.com.au/insurance/business/Find-an-insurance-adviser  

Click here for more information on CGU’s Professional Indemnity Policy options or visit http://www.cgu.com.au/insurance/Business/Products/Professional-Indemnity