If you're thinking about buying a PI policy, 'what does professional indemnity insurance cover?' is a question you'll want a straight answer to.
So, the straightforward(ish) answer is this: ‘claims of negligence made against you by an unhappy client’. In other words, a legal claim for compensation made by a customer who says they were left out of pocket because you didn't do your job properly.
But while that’s certainly true, it’s not really giving you the bigger picture. Because the things you really want to know are: exactly how does it protect me? What do I get for my money? And does my policy cover me in any other ways?
How PI cover protects you
With professional indemnity, as with all insurance, you pay money (the 'premium') to an insurer. In turn, the insurer 'agrees' to pay out if a loss occurs under the terms of the policy.
In this case, you can think of the loss as ‘claims of negligence made against you by an unhappy client’ – like we talked about above.
Claims usually follow on the heels of some kind of mistake you’ve made. But, actually, surprisingly little has to happen to trigger your PI policy. Just an allegation is enough, well-founded or not.
In either case, the insurer pays for the legal costs of your defence, as well as any damages or awards due to your client – up to your policy's level of cover. You don’t pay a thing (apart from the excess if relevant).
What else is covered by professional indemnity insurance?
Your PI insurance can help with all kinds of genuine mistakes. Although if a claim comes about because you've been reckless, your insurer will have questions to ask and may refuse to cover it.
Here are some other instances where professional indemnity can cover legal costs and damages, depending on the policy wording:
- Defamation - someone claims you've said or written something that's negatively impacted their reputation.
- Intellectual property infringement - say you use an image on your website without getting the necessary permission from its owner.
- Losing documents or data - maybe physical paperwork goes missing or you have a data meltdown and lose crucial info.
- Negligent misstatement or misrepresentation - for example being economical with the truth in encouraging a client to sign a contract.
- Employee dishonesty - when people you employ do bad things or commit fraud without your knowledge.
- Transmission of computer viruses - if you accidentally spread a virus by email or by sharing data that damages other people's networks.
- Breach of confidentiality - if someone spills your client's sensitive info without their permission.
The benefits of having a PI policy
One of the obvious benefits you get is financial; the cover is there to safeguard your business and its assets should the worst happen. That’s really important of course because, ultimately, it’s your livelihood we’re talking about.
Without insurance, if called upon to defend yourself, even an unfounded claim could wipe out your life’s work in a matter of weeks. Because let's face it, solicitors aren't cheap and some PI claims can run into tens or hundreds of thousands of pounds.
But there are also less tangible, arguably more significant benefits to protecting yourself with professional indemnity insurance.
Having the financial might of an insurer and their crack legal team behind you tips the balance a little more in your favour. That big arm around your shoulders means you needn’t feel like the little guy battling a potentially much bigger accuser all alone. It can help give you peace of mind.
Keep calm and stay protected
So, what does professional indemnity insurance cover? What protection does it offer? Think of it this way: professional indemnity doesn’t offer protection; it is protection.
What it doesn't cover is your past work if a claim's made after you cancel your policy. That's because PI needs to be up and running not only when the work was done, but when a claim is made. It's why it's important your cover is retroactive.
The same applies if you retire or cease trading. If that happens you need what's known as run-off cover, which continues to protect you against claims at a lesser price.
When all's said and done, having a good professional indemnity policy gives you the confidence you need to do what you do every day, and to do what you do best: run your business.
And that’s definitely the kind of cover worth having.
You can read more about how professional indemnity insurance protects you and what it covers. Or call the team on 0345 222 5391.
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