![\"Answering](\"https:\/\/www.policybee.co.uk\/blog\/wp-content\/uploads\/2012\/05\/man-walking-up-professional-indemnity-stairs-graphic.jpg\")
<\/figure>\n<\/div>\n\n\nA question customers often ask us is: ‘How much professional indemnity insurance do I need?’ And what we usually advise them is: as much as you can afford.<\/p>\n\n\n\n
Yes, we know. Not much help, is it?<\/p>\n\n\n\n
But bear with us because there\u2019s method in our vagueness.<\/p>\n\n\n\n
The problem we have is that there isn’t a one-size-fits-all rule. That’s because every business is different. And every business faces different risks.<\/p>\n\n\n\n
That makes it difficult for us to say precisely how much professional indemnity (PI) insurance<\/a> is enough. So we get you to tell us instead. We do that by making you think about these things: what you do, who you do it for, and what it’s worth.<\/p>\n\n\n\n Your answers help build a picture of your business’s risks \u2013 the things that could go wrong and ultimately lead to a claim against you. And that, in turn, helps determine the level of PI cover you need.<\/p>\n\n\n\n <\/p>\n\n\n\n Figuring out how much professional indemnity insurance you need can be a little confusing. There\u2019s lots to consider but don\u2019t overcomplicate it. Take it step-by-step using our list below:<\/p>\n\n\n\n <\/p>\n\n\n\n What’s your business? What do your clients ask you to do for them? What could go wrong? Worst-case scenario, how much will it cost to put right?<\/p>\n\n\n\n Also, how much business do you do? If your turnover is relatively high, you’ve either got lots of clients or fewer, high-value clients. Either way, claims are more likely and\/or will be for more money.<\/p>\n\n\n\n Your professional indemnity insurance needs to cover the total cost of correcting your mistakes and<\/strong> the legal costs of a claim against you.<\/p>\n\n\n\n For example, a client sues you and the total bill to fix your error, compensate them, and pay each party’s legal expenses comes to, say, \u00a3300,000.<\/p>\n\n\n\n If your level of cover is only \u00a3250,000 you\u2019re faced with meeting the \u00a350,000 shortfall yourself. Ouch.<\/p>\n\n\n\n <\/p>\n\n\n\n Are your clients small businesses or large multinationals? Are they in ‘rich’ industries like banking, finance, or IT? Are they by-the-book or more laid back?<\/p>\n\n\n\n As a consultant or contractor, you\u2019re up against it. Big companies won\u2019t hesitate to unleash the might of their legal department or corporate lawyers if they think there\u2019s a reason to claim. And if they do claim, they won\u2019t go easy.<\/p>\n\n\n\n If you find yourself on the receiving end of an expensive-looking lawsuit, your policy needs enough weight to cover all the potential costs of defending you and<\/em> compensating your client.<\/p>\n\n\n\n <\/p>\n\n\n\n What are your average and largest fees? What\u2019s a typical total project value? Is your client expecting either a revenue boost or a cost saving as a result of your work?<\/p>\n\n\n\n Don\u2019t assume you can only be sued for the amount your client pays you.<\/p>\n\n\n\n To some extent, you can limit your liability by contract, sure. But if things go wrong and a court decides you\u2019re liable for more, you\u2019ll have to pay it.<\/p>\n\n\n\n If your work is part of a larger project and your client alleges your mistake is responsible for delaying or disrupting it, they\u2019ll sue you for their total<\/strong> loss. Not just your part in it.<\/p>\n\n\n\n Bear in mind many projects, particularly those in architectural work or involving large-scale IT changes, can cost many \u00a3millions. You don\u2019t want a bill like that through your door.<\/p>\n\n\n\n <\/p>\n\n\n\n There are many industries for whom PI insurance isn\u2019t optional. For accountants, surveyors, and many other professionals, it\u2019s a necessity.<\/p>\n\n\n\n If you\u2019re a member of a professional body, like the ACCA<\/a> for accountants or RICS<\/a> for surveyors, you\u2019ll need to maintain a minimum level of of professional indemnity insurance cover to qualify as a member. The requirements are different for every professional body.<\/p>\n\n\n\n You might also be legally required to have professional indemnity insurance if you land a big contract. Especially if it\u2019s in the public sector. This gives your client peace of mind that any problems won\u2019t leave them out of pocket.<\/p>\n\n\n\n <\/p>\n\n\n\n <\/p>\n\n\n\n Professional indemnity (PI) insurance protects you against allegations of negligence<\/a> and the legal costs of defending you, regardless of the claim’s validity.<\/p>\n\n\n\n That’s important because even if you’re 100% sure you didn’t mess up, it doesn’t mean clients or third parties can\u2019t claim<\/em> you did. And if that happens, doing nothing about it isn’t an option. <\/p>\n\n\n\n Getting a solicitor to help won’t be cheap. The cost of your defence could easily run into many \u00a3tens (or even hundreds) of thousands if the claim is complicated or protracted.<\/p>\n\n\n\n In fact, in many claims, the legal costs are larger than the amount that\u2019s claimed for.<\/p>\n\n\n\n So make sure you choose enough cover to pay a claim’s potential legal costs. <\/p>\n\n\n\n <\/p>\n\n\n\n The type<\/em> of professional indemnity policy<\/a> you go for is almost as important as its level of cover. Here’s why:<\/p>\n\n\n\n In the aggregate<\/strong> If you were unlucky enough to have, say, three claims against you and their combined costs are more than \u00a3250,000 then you\u2019d be a bit stuck.<\/p>\n\n\n\n Any one claim<\/strong> Though you’d still need to be careful and check if there\u2019s an inner limit (or \u2018sub-limit\u2019) attached to your policy. As that could limit how much your insurer pays out for certain categories of claims.<\/p>\n\n\n\n When it comes to PI, inner limits are usually placed on things like intellectual property disputes and claims involving lost documents which need to be restored. AKA ‘risky’ areas that cost insurers lots to fix.<\/p>\n\n\n\n So it\u2019s really important you read your policy wording carefully and speak to your insurer (or a broker like us) if you think you need more cover.<\/p>\n\n\n\n <\/p>\n\n\n\n A word of warning about reducing your level of cover. We’re sometimes asked about this by customers who’ve been working on high-value contracts that have come to an end. <\/p>\n\n\n\n The thing about reducing your level of cover is that it changes your policy retrospectively<\/a> too. You should always think about your previous work and consider whether your insurance is still enough to pick up any claims that could arise from it.<\/p>\n\n\n\n Most claims come from jobs and contracts you\u2019ve already completed and they\u2019ll be subject to the level of cover you have now, not what you had when the work was done.<\/p>\n\n\n\n <\/p>\n\n\n\n We can\u2019t give a recommended level of professional indemnity insurance<\/a> in this blog. As you\u2019ve seen, it depends on your individual circumstances.<\/p>\n\n\n\n We know how confusing getting the right PI insurance can be, though. We\u2019re here to answer any questions you have and guide you towards the cover that\u2019s right for you. Just give us a call on 0345 222 5391<\/strong> and we’ll be happy to help.<\/p>\n\n\n\n In the meantime, remember that budgeting for insurance (at whatever level of cover) is always going to be easier \u2013 and cheaper \u2013 than budgeting for a disaster.<\/p>\n\n\n\n And that’s why we advise you to buy the highest level of cover you can afford.<\/p>\n\n\n\n Image used under license from Shutterstock.<\/em><\/p>\n\n\n\n <\/p>\n","protected":false},"excerpt":{"rendered":" A question customers often ask us is: ‘How much professional indemnity insurance do I need?’ And what we usually advise them is: as much as you can afford. Yes, we know. Not much help, is it? But bear with us because there\u2019s method … Continue reading How to calculate how much professional indemnity insurance you need<\/strong><\/h2>\n\n\n\n
1. What you do (your liability)<\/strong><\/h3>\n\n\n\n
2. Who you do it for (your clients)<\/strong><\/h3>\n\n\n\n
3. What it’s worth (your contract values)<\/strong><\/h3>\n\n\n\n
Required levels of professional indemnity insurance<\/strong><\/h2>\n\n\n\n
Other considerations when deciding how much professional indemnity insurance is enough<\/strong><\/h2>\n\n\n\n
Legal costs<\/strong><\/h3>\n\n\n\n
\u2018In the aggregate\u2019 or \u2018any one claim\u2019?<\/strong><\/h3>\n\n\n\n
If you buy a policy with, say, \u00a3250,000 cover ‘in the aggregate’, that’s the maximum amount the policy will pay for the accumulated total of all<\/strong> claims made against you in one policy period.<\/p>\n\n\n\n
If, on the other hand, you bought \u00a3250,000 cover for \u2018any one claim\u2019 then you’re covered for unlimited claims, up to a maximum of \u00a3250,000 for each one<\/strong>.<\/p>\n\n\n\nPast work<\/strong><\/h3>\n\n\n\n
Still not sure about how much PI cover you need?<\/strong><\/h2>\n\n\n\n