What is professional indemnity insurance?
Professional indemnity insurance covers the legal costs and damages you could be required to pay if a customer takes legal action against a mistake your business has made. This may be the result of your company offering them bad advice, or delivering poor designs and professional services. Also known as PI insurance, this covers a number of different situations, such as professional negligence, the loss of documents or data, third-party financial losses, defamation, and the breach of copyright and/or confidentiality. If you’re not properly insured, even the smallest mistake could leave you vulnerable to thousands of pounds’ worth of expenses, which could spell financial disaster for your business.
Why do you need professional indemnity insurance?
Even the most organised companies aren’t immune to human error. The most innocent mistakes can happen without you or your employees realising, and lead to greater repercussions than you could have ever imagined. Rather than leave yourself open to potential claims, a professional indemnity insurance policy could financially protect your livelihood from any unexpected errors. PI insurance is sometimes stipulated as a requirement by clients or industry bodies, so a policy could even help you obtain more work.
Unlike public liability, professional indemnity insurance is not an automatic cover, it is an optional cover which can be added to your standard Tradesman Saver policy.
Tradesman Saver’s Professional Indemnity Is Available With Tradesman Insurance
Our standard cover is:
- Up to £5 million cover for public and products liability
- £10,000 cover for any financial loss (£50K cover optional)
- Worldwide liability cover for temporary work abroad for up to 14 days (excluding the USA and Canada)
Like all our policies, taking out professional indemnity insurance with Tradesman Saver gives you and your business instant financial protection and access to a 24-hour helpline, providing all the legal advice you need. Our standard policy offers you up to £50,000 of professional indemnity cover. However, if you don’t believe this is an adequate amount, contact us so we can arrange the cover best suited to your needs.
This is one of our optional covers, and you will need to take out comprehensive public liability insurance in addition to this. Public liability differs from professional indemnity in that it provides cover against any claims made by customers or members of the public who have been injured by your business activities. Taking out both policies means you will be insured against all third party compensation claims, as well as the associated expenses and fees. You can arrange public liability cover by taking out our automatic cover package, which also safeguards you against accidental death, public liability insurance, products liability, financial losses, and legal expenses.
For the most comprehensive cover possible, we suggest taking out professional indemnity insurance with Tradesman Saver, as well as our five-part automatic package as outlined above. However, please note that certain trades will not be eligible for professional indemnity. Click here to see all the occupations we cover and whether the policy is available as an optional cover for your trade.
Please note that professional indemnity insurance is an optional cover that you can add to your policy alongside cover for your contract works.
Online & Anywhere
We like to keep things simple. Your quote, purchase and documents are all available online, anytime.
No need to wait for your documents. Our tradesman cover starts from the moment you purchase.
Public liability, products liability, financial loss, legal expenses and accidental death cover as standard.
Cashflow is important to every business. Spread the cost by paying in easy monthly instalments.
Examples of Professional Indemnity Insurance Claims
The following are circumstances demonstrating the value of professional indemnity insurance:
For example, if you are an architect drawing up plans for a new building, you could be liable an error you’ve made is only discovered after materials have been bought and construction has begun. As new materials will need to be purchased and the structure rebuilt, you could face a claim of negligence. However, the financial loss to the building contractor would be covered by your professional indemnity insurance policy, meaning you wouldn’t have to pay for the damage.
Similarly, if you are an electrician who has claimed a retailer’s electrical installation is safe and in compliance with regulations, you could have to pay compensation if it turns out you’re wrong. This is because your mistake would mean that the shop couldn’t open, and the owner could demand compensation for loss of income. With professional indemnity insurance, you wouldn’t need to pay for this claim out of your own pocket.
Please note that neither of these events would be covered by public liability insurance because nobody was injured and no damage was caused to property. This is why it can be sensible to protect your business with both policies.
Professional Indemnity Insurance: Frequently Asked Questions
Who needs professional indemnity insurance?
You may need professional indemnity if you do any of the following as part of your trade:
- Provide a professional service
- Offer expert advice and consultancy
- Handle client data
- Take responsibility for clients’ intellectual property
If so, you could easily make a mistake that has the potential to ruin a client’s environment, finances, or reputation, and be liable to pay compensation as a result. Even if any claims are unjustified, you would still have to pay the price of legal fees, making professional indemnity insurance vital.
Is professional indemnity insurance automatic?
Professional indemnity is not automatically included in Tradesman Saver’s insurance package. This is an optional cover providing up to £50,000 insurance for selected trades. If this is not available for your trade, or you need a higher limit, please contact us to arrange a stand-alone policy just for you.
Is professional indemnity insurance compulsory?
Though strongly recommended, professional indemnity insurance is not a legal requirement—in fact, employer’s liability cover is the only compulsory insurance for businesses with employees. However, some professional bodies or regulators demand that their members hold professional indemnity insurance. This generally applies to solicitors, accountants, architects, chartered surveyors, financial advisers, and some healthcare professionals.
What does professional indemnity insurance cover you for legally?
Professional indemnity insurance covers compensation payments and legal expenses in the event that a client makes a claim against a business at-fault. This could include coverage for libel and slander, unintentional breach of confidentiality, infringement of intellectual property rights, dishonesty of employees, and loss of documents. However, it doesn’t insure you against any reputational damage your mistake has caused the client.
How much professional indemnity insurance do I need?
We offer our customers up to £50,000 cover, but you should check whether your clients or professional regulators require a minimum amount. It’s also important to consider the cost of a possible compensation claim made against your business, factoring in how high-risk your trade is, and the size of your contracts.
How much does professional indemnity insurance cost?
The cost of your policy depends on factors like the nature of your work, any previous claims that have been made against you, and how much cover you require—all of which you will need to disclose when applying for a quote from Tradesman Saver.
Is professional indemnity insurance necessary if I work from home?
If your business offers advice and professional services to clients, you should consider insurance, regardless of where you’re based. Working remotely won’t necessarily prevent you from making what could be a costly mistake, so taking out this cover means you’ll be financially protected if a claim is ever made against you.
What if professional indemnity insurance is not available for my trade or profession?
If professional indemnity insurance isn’t available for your particular trade or profession, please give us a call to arrange a quote for a tailored policy.
What is a retroactive date on professional indemnity insurance?
The retroactive date on your policy is the date from which you’ve held uninterrupted professional indemnity insurance, or a date in the past from which your insurer has agreed to cover you. You are only covered from the date of your current policy, and any previous claims made against you won’t be covered by your insurance.
Electrician’s & Electrical Contractor’s Professional Indemnity Insurance
While public liability may be at the forefront of your mind when you’re choosing the right electrician’s insurance policy for you, professional indemnity can be just as important for electricians and electrical contractors. Because part of your job can involve producing designs and specifications, if there’s a problem with these and your client suffers a loss as a result, there’s a possibility a compensation claim could be lodged against you for professional negligence.
That’s where professional indemnity can help. Because it specialises in protecting businesses from claims of professional negligence, your insurer will help pay the costs of the claim, so you can focus on doing what you do best, instead of fretting about the impact on your business.
Self-Employed Professional’s Professional Indemnity Insurance
For most self-employed professionals, professional indemnity insurance is crucial to protecting your business. Particularly for professionals who have to look after customer records, there’s a risk of unintentional breach of confidentiality, which could see you faced with a claim of professional negligence as a result of your client’s financial loss. In cases like these, it’s imperative to have a professional indemnity insurance policy in place, to protect yourself from these risks. You will need professional indemnity insurance in addition to your self-employed public liability insurance.
Provided you’ve purchased this cover, your insurer will either fight the claim for you, or pay the claim on your behalf. This means you can spend a little less time worrying about what the future holds for your business, and a bit more time running it.
Builder’s Professional Indemnity Insurance
As a builder, you already probably know that you need builders public liability insurance, to insure you against any claims resulting from injury or damage to a third party’s property. However, what you may not realise is that professional indemnity insurance can be almost as instrumental in protecting your business as your public liability insurance.
Say you prepared some designs for a client, but they weren’t up to specification and the client suffered a financial loss as a result – that could potentially lead to the client filing a claim of professional negligence against you. And in that circumstance, without professional indemnity insurance, your claim wouldn’t be covered and you’d be left paying out of your own pocket. But, if you did happen to have professional indemnity insurance, not only would the claim be covered by the insurer, but they’d also fight the claim on your behalf. It’s one of those kind of covers that doesn’t seem all that important, but when you really need it, it could save your business from a big financial hit.
Plumber’s Professional Indemnity Insurance
Working as a plumber, you’re probably already well versed in why plumbers public liability insurance is essential for the work you do. But the one type of insurance you may not have considered is professional indemnity. Unlike its more famous brother cover, professional indemnity insurance can be invaluable if you were faced with a claim of professional negligence due to, say bad advice which caused your client to suffer a financial loss as a result.
With professional indemnity insurance in place, if you were faced with such a claim, your insurer would cover the costs of the claim, as well as potentially fighting the claim on your behalf. This makes it an invaluable tool when it comes to protecting your business and your future.
Contractor’s Professional Indemnity Insurance
As a contractor, while you may be aware that the most important thing to look for when choosing your contractors insurance policy is public liability insurance, you may not be aware of how vital professional indemnity insurance is to what you do too. Protecting you from claims for professional negligence, professional indemnity is particularly important to contractors because it covers things like claims for bad advice or incorrect designs which resulted in a financial loss for the client.
By having it in your insurance policy, you’ll not only gain the peace of mind that in the event of a claim, your insurer will pay it, but your insurer will fight any claims like this on your behalf as well. This ensures that no matter what happens, you can keep your business afloat, even when faced with a claim like these.