What is Professional Indemnity insurance?

Professional Indemnity Insurance Explained

Our Professional Indemnity guide walks you through what you should know about Professional Indemnity, such as what it covers/excludes and events that may result in a Professional Indemnity insurance claim.

Professional Indemnity Insurance defined

Professional Indemnity insurance helps protect your business in the event a claim of negligence or breach of duty is made against you and your business. 

For example, someone may allege you’ve made a mistake, overlooked a critical piece of information, misstated a fact or they have misinterpreted you in the course of your work. If this results in a financial loss for your client, they may take legal action against you to recover these losses. 

If this should happen, Professional Indemnity insurance may protect your assets and your reputation, as well as provide financial cover. This means you can continue in your business without the stress of financial or reputational ruin should a claim arise. 

The risk of claims against you isn’t always determined by your skill or level of professionalism. There is also the risk of an unhappy client making a claim against you. 

Regardless of the merit of a claim, your Professional Indemnity insurance could cover your legal defence as well as any judgments or settlements that you or your business may have to pay to compensate the suing party, subject to the policy terms and conditions. 

What types of businesses require Professional Indemnity insurance?

Professional Indemnity insurance is designed to protect businesses that provide advice, professional services or consulting. This may include architects, engineers, consultants, lawyers, accountants, and healthcare providers. These professions face unique risks as mistakes, omissions or errors in their advice or service could potentially lead to significant financial loss for their clients.

What does Professional Indemnity insurance cover? 

Professional Indemnity insurance can offer protection against certain types of risks, such as: 

  • Misleading or negligent advice
  • Professional duty breaches
  • Breaches involving confidential or sensitive information
  • Accusations of defamation, libel or slander
  • Misplacement or destruction of client documents
  • Intellectual property rights violations
  • Legal fees awarded against you
  • Costs associated with legal defence or claims response
  • Expenses related to the investigation of a claim
  • Costs associated with disciplinary proceedings
  • In some policies, Professional Indemnity coverage may also include public relations expenses to manage your business reputation.

For business owners in the allied health sector, Professional Indemnity may extend to claims of bodily injury or illness that are directly related to the professional services provided.

3 examples of Professional Indemnity claims

Here are three examples of some common Professional Indemnity claims you might face if and when an unexpected event happens in your normal course of work: 

Not doing it by the book:

A bookkeeper installed new accounting software for which the bookkeeper had no experience using. This resulted in a number of errors and omissions which had a financial impact on one of the bookkeeper’s customers. They claimed $25,950 in damages and the claim was paid in full by the insurer.

Messy migration:

A migration agent mistakenly lodged an incorrect visa application on behalf of a client. In order for the client to remain in Australia, they had to submit a different visa and the client had to leave the country briefly to activate this new visa. The claim of nearly $10,000 was paid to cover the cost of the new visa and flights for the client, less the retainer fee.

Erroneous advice:

A quantity surveyor attended an onsite meeting and misunderstood the verbal description and specifications of the building project. When looking at the drawings, he had a preconceived notion of what was to be plastered and what was not. When the time came to pay, the estimate was out by many thousands of dollars. The Project Manager looked to the quantity surveyor who had made the error and asked him to pay for the variation of cost. The surveyor’s insurer recognised his liability and made a quick settlement offer. 

How much does Professional Indemnity cost?

The cost of Professional Indemnity insurance depends on several factors, including your profession, the size of your business, the level of risk associated with your services, and the amount of coverage you choose. Every business is different and so would the type of cover and policy cost. 

According to our analysis, small businesses pay an average of $97 per month for their Professional Indemnity insurance with BizCover. 

IT consultants might pay a different fee in premiums compared to medical practitioners due to the unique risks each face in their respective fields. Generally, high-risk professions may face higher premiums due to the potentially large financial damages claims can incur.

BizCover Logo