For busy professionals, 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.
That’s where Professional Indemnity insurance* comes into play. This form of insurance is designed to protect businesses that provide specialist services or professional advice. Let’s delve deeper and look at eight facts about this important form of business insurance.
1. Professional Indemnity provides cover for professional wrongdoing.
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 (PI) insurance offers protection for businesses that provide specialist services or professional advice. It is designed to respond to claims against your business for losses as a result of actual or alleged negligent acts or omissions in the provision of your professional service or advice. PI Insurance will also assist with the legal costs associated with responding to or managing claims which are covered by the policy.
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.
2. Professional Indemnity insurance helps shield your finances.
A slip of the tongue, document error, or missed deadline may not seem like a big deal. However, they could cause enormous problems for your clients and your business. If a client thinks you’re to blame for their financial losses, they could demand repayment.
Compensating clients and responding to lawsuits can quickly become expensive. Your legal fees will only grow the longer it takes to settle a dispute. Without Professional Indemnity insurance, your business and personal finances might be drained before you know it.
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
3. Professional Indemnity policies don’t cover everything.
While a Professional Indemnity policy can cover your business in many circumstances, there are times when you won’t be covered. Professional Indemnity exclusions are events that your policy will not cover. Exclusions are standard to all varieties of insurance, which is one reason why reading the policy documents and wording is so important.
Common Professional Indemnity exclusions include:
- 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
4. A wide range of occupations may need Professional Indemnity cover.
Professional Indemnity insurance protects those who deliver professional advice or services. Some common examples of these professions include accountants, real estate agents, engineers, IT specialists, and healthcare professionals.
However, Professional Indemnity may be important for some hands-on occupations, too. Consultants, event managers, and some tradies (like electricians and carpenters) may consider Professional Indemnity insurance to help protect themselves and their business.
Professional Indemnity insurance may be required to work in specific industries. Real estate agents, migration agents, and accountants are just a few occupations that may need a policy depending on where they work and if they’ve joined a professional organisation.
5. The price of Professional Indemnity insurance varies.
There’s no one-size-fits-all policy when it comes to Professional Indemnity insurance. Every business and sole trader is different, with exposures to various risks. Many professions have unique categories of risks, so as a general rule of thumb, the higher the risk, the higher the premium.
These are some of the factors that impact how the price of your policy is calculated:
- Your business revenue
- Size of your business
- Amount of coverage required
- Who is being covered by the policy? Are they qualified to perform the job?
- Claims history
Comparing quotes from different insurance companies is one way to understand how much a policy will cost for your business.
6. Professional Indemnity policies are “claims made” policies.
Professional Indemnity policies are written on a “claims made” basis. This means that they will only respond to claims made against an insured and alerted 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.
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.
Recommended reading: What is the difference between claims-made and occurrence-based insurance?
7. Run-off insurance can help cover you beyond the term of your policy.
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.
Run-off Professional Indemnity’s importance cannot be overstated. It can provide you with important peace of mind, knowing that you’re protected after you’ve closed up shop.
8. Getting your Professional Indemnity insurance sorted is easier than you might think.
Gone are the days of ringing insurers one at a time to get insurance quotes. BizCover has made buying small business cover a no-dramas experience from start to finish.
We offer a range of competitively priced Professional Indemnity cover from selected leading Australian insurers. Even better, you can compare other types of policies—including Public Liability, Business Insurance Packs, Cyber Liability and Management Liability—and buy them all at the same time. No complicated paperwork necessary!
Jump online or give us a call to receive quotes from a great range of trusted leading insurers. Once you’ve selected your policy options, we will deliver your documents straight to your inbox, with no mountains of paperwork to complete.
Experience insurance made easy today.