10 Facts About Professional Indemnity Insurance

Providing expert advice and specialised services assisting your clients is all in a day’s work. But even though you take great care to deliver a high standard of expertise, the reality is claims can still occur, even when you least expect it. Professional Indemnity (PI) insurance is designed to protect businesses that provide specialist services or professional advice.

1. It covers professional wrongdoings

A lot can go wrong when your job is giving advice, designing custom solutions, or representing someone else’s interests on their behalf. Professional Indemnity claims can arise from simple things like giving incorrect advice, a miscalculation, or an incorrect diagnosis or treatment. An unhappy client can even accuse you of professional negligence if they are dissatisfied with your work.

Professional Indemnity insurance offers protection for businesses that provide specialist services or professional advice. It is designed to cover claims against your business for losses as a result of negligent acts or omissions in the provision of your professional service or advice.  PI Insurance may also cover the legal defence costs associated with claims which are covered by the policy.

2. Professional Indemnity policies are “claims made” policies

Generally speaking, Professional Indemnity policies are written on a “claims made” basis. This means that they will only respond to claims made against an insured and notified to the insurer during the policy period, regardless of when the insured performed the work that is the subject of the claim.

It also means that if the policy has expired, no additional claims can be made under the policy. You cannot file a claim with your insurer after your policy has been cancelled.

Usually, Professional Indemnity policies are also subject to a retroactive date. This is either the date from which you’ve held uninterrupted cover (even if you switched insurers) or the date from which your insurer has agreed to cover you. Events that happened before your retroactive date won’t be covered.

It’s important to consider both these aspects before making a decision about your policy.

Recommended reading: What is the difference between claims-made and occurrence-based insurance?

3. Professional Indemnity insurance protects your finances

A single allegation can expose your business to legal costs, compensation payments, and ongoing financial strain. Professional indemnity insurance is designed to help protect your finances when a client claims your service caused them financial loss.

If a client believes your advice or recommendation caused them financial losses, they could hold you accountable.

Compensating clients and responding to lawsuits can quickly become expensive. Without insurance in place, these costs are typically paid out-of-pocket.

Professional Indemnity insurance policies will typically cover expenses such as:

• Payment of compensation as a result of a claim, including but not limited to court-awarded damages.
• An award of legal costs against you.
• Reasonable legal costs incurred in defending or responding to the claim.
• Claim investigation costs.
• Disciplinary proceeding costs.

4. Professional Indemnity has exclusions

While a Professional Indemnity policy can cover your business in many circumstances, there are generally exclusions, limits, and conditions.

Common Professional Indemnity exclusions may include such things as:

• Claims and circumstances known prior to the inception of the policy.
• Contractual disputes.
• Disputes concerning your professional fees.
• Personal injury or property damage (unless caused by a breach of your professional duty).
• Intentional damage.
• Fraud or dishonesty.

Depending on your industry, you may also want to consider Public Liability, Cyber Liability, or Management Liability insurance or other policies to cover risks outside professional services.

5. It is designed for a wide range of professions

Professional Indemnity insurance is not just limited to traditional “professional” industries like law or accounting. It is designed for a wide range of occupations where clients rely on your knowledge, expertise, or service outcomes. This includes some hands-on occupations such as Consultants, marketing, design, engineering, event managers, and some tradies (like electricians and carpenters).

Professional Indemnity insurance may be mandatory in certain industries. For example, real estate agents, migration agents, and accountants may need to have a PI policy, depending on the state or territory they operate in and whether they are members of a professional body.

6. Run-off cover protects you after your policy ends

Professional Indemnity claims can happen months or even years after you’ve completed your work. So, what happens if you cancel your policy because you’ve sold or closed your business or retired? A claim or lawsuit could be financially devastating without cover in place.

This is where run-off insurance becomes important. A run-off insurance policy can be taken out before the closure or sale of your business. It is intended to provide additional cover for future claims that may be made against you arising from events that occurred prior to the start of your run-off policy.

Depending on your circumstances and profession, this may be something you wish to consider.

7. It is often a contractual requirement

Many commercial contracts require Professional Indemnity insurance as a condition of engagement.

Clients may specify a minimum insured amount, such as $1 million, $2 million, $5 million, or more depending on the size and risk of the project. Maintaining appropriate cover is essential to meet conditions or supplier agreements.

8. Your cover can start before your policy

Professional Indemnity insurance can include protection for work completed before your current policy started. This is determined by the retroactive date.

If your policy includes an unlimited retroactive date, it may respond to claims relating to past services, even if those services were delivered before the policy inception date. If the retroactive date is limited, only work completed after that date may be eligible.

This is particularly important when you are taking out professional indemnity insurance for the first time or switching insurers.

9. The retroactive date determines past work cover

The retroactive date sets the point from which your past professional services are covered.

For example, if your retroactive date is 1 July 2025, the policy may respond to claims about work performed on or after that date, provided the claim is made during the policy period.

Understanding this date helps ensure there are no unintended gaps in protection.

10. Getting a PI cover is easier than you might think

With BizCover, you can compare quotes from leading insurers online in minutes, then buy your policy instantly that suits your business.

Call us or get a quote online from trusted insurers. Experience insurance made easy today.