Everyone has bad days at work. But for some people, mistakes at work can be (literally) costly. That’s where professional indemnity insurance (PI) comes in.
PI insurance is designed to ensure that freelancers and businesses (regardless of size) are financially compensated if a client suffers a loss as a result of their work and a civil action is brought against them. It covers the costs of defence and indemnification. This is a welcome relief for professionals who provide advice or services or deal with confidential data or intellectual property.
It’s essential to understand professional indemnity insurance so you can make an informed decision about the right product for your business. Here we discuss professional indemnity insurance and look at some of its key points.
Who needs professional indemnity insurance?
When deciding whether your business needs professional indemnity insurance, you should first check whether your regulatory or professional body requires it. If you work as an accountant, architect or committee member, you may need to carry professional indemnity insurance.
You may also be required to carry professional indemnity insurance for contracts with clients.
To determine if your business needs professional indemnity insurance, you should first check to see if your regulatory body or professional association requires you to carry insurance. If you work for an accounting firm
Even if not, you may decide that your business needs professional indemnity insurance for the peace of mind of your potential clients and for your own peace of mind.
This insurance is precious for businesses that provide consulting or professional services or handle client data or intellectual property. It can, for example, cover claims made against you as a result of poor data management or incorrect advice, resulting in financial loss to your clients. This is why many businesses purchase insurance from IT consultants to designers to accountants.
What claims are covered by professional indemnity insurance?
Professional indemnity insurance aims to protect you from the costs incurred in the event of a claim from a disgruntled client. It is crucial to ensure that you are compensated for errors. Whether they are measurement errors or policy recommendations resulting in a client loss.
For example, compensation may be required if a client claims for any of the following reasons
- Negligence – loss or misplacement of confidential documents.
- Copyright infringement – using copyrighted images or photographs without obtaining the necessary rights or licenses.
- Breach of confidentiality – disclosure of personal or commercially sensitive information without consent.
Does the law require professional indemnity insurance?
It is not a legal requirement, but most professional associations and organizations require their members. To carry professional indemnity insurance and regulate it in their rules.
- Lack of insurance is generally subject to severe disciplinary action and can result in fines or closure of the business by the regulator.
- Many unregulated services, such as computer and technical assistance, do not require PI insurance. Those who do not need to carry such insurance should do so. Management, business and marketing consultants generally do not necessarily have professional indemnity insurance but often do so to protect themselves from potential indemnity for legal fees and damages.
- Many large corporations and public authorities also insist that the service providers carry PI insurance and require proof of it.
- Other professions that provide professional services often carry insurance, such as computer professionals, HR consultants, graphic designers, interior designers, personal trainers, tutors, teachers and counselors. However, this list is more diverse and extensive than these professions.
Wrapping Up
Professional indemnity insurance is an important and growing segment of the business insurance market. Many insurers offer different types of online and offline products and are actively seeking market share. The current situation is that they are competing aggressively.
With this type of insurance, freelancers can work without fear of being sued by clients or third parties for issues related to their business activities. This means that professionals can perform their work with more security.
Author Bio
Lily Poole is a Property and Bronx Insurance Brokers by profession. She is pretty well experienced in the insurance and accounting field. And has an impressive profile in the training and development industry.
