A common misconception is that the claims professional indemnity insurance covers are only the experiences of the business that does inadequate work for clients. This is not true, in this day and age anyone can sue anyone else over almost anything and sometimes they even win. Even when they do not win, a certain portion of the public usually believes the accusers claims. This can be detrimental for a business’s reputation.
With the growing popularity of the blogging on the internet, reputation is extremely important. If a business’ reputation gets tarnished as a result of a claim made against them from an unhappy client, the word can spread like wildfire over the internet and community. This is where the value of professional indemnity insurance can be recognized.
If you were somehow involved in consulting or advising a client and they have had a financial loss it is possible that if the client is upset and wants to look at all possible options for compensation this could result in them filing a claim against you. Most clients will be more than happy to agree to the terms of professional indemnity insurance, as this means that if anything happens that causes them a loss, your insurance will pay for it. Such an example may be that you area private consultant and the contractor made an error in numbers causing your client a financial loss and putting you in the hot seat.
A lot of practices, even the ones with clean claims records, should be cautious. Increasing the amount of coverage if is appropriate, may be necessary from time to time depending on the size of a job contract or the level of risk involved. Businesses or consultants whose insurance coverage is not sufficient may need to draw funds from their own pockets and that is never a good thing. With professional indemnity insurance you do not have this problem.