What is Professional Indemnity Insurance, and Why Should Builders Care?

Australian builders can get insurance to protect just about any part of their business—from tools and materials, tool and equipment cover, contract works, and protection against worksite hazards like property damage and workplace accidents. But there might be one part of your business that’s not yet covered—your professional services and advice.

That’s where Professional Indemnity could be an essential addition to a builder’s insurance toolbox. Read on to learn more about Professional Indemnity insurance and why it might be a must-have policy for building practitioners.

What is Professional Indemnity insurance?

Professional Indemnity protects you against losses claimed by a third party due to alleged or actual negligence in your professional services or advice. A policy helps pay defence costs (such as legal costs, investigator costs and expert fees) and compensation to the wronged party, up to the policy limits.

So, what does this mean for builders? A Professional Indemnity policy covers key work activities, including*:

Lodging building compliance declarations and regulated designs

A policy may protect you if these professional services result in financial loss caused by:

• Completion delays (i.e., loss of rent, loss of business opportunities)
• Decreases in property value caused by certain defects which are not rectifiable
• Budget overruns
• Delay costs (i.e., holding costs, interest on loans)
• Increased operating costs for buildings

Alleged breach of professional duty in the course of the insured’s building practitioner activities

This might include things such as failing to exercise reasonable care and skill when providing your services, failing to obtain necessary permits or approvals, or failing to complete work within an agreed timeframe.

Legal representation costs for investigations and defence costs

If a claim or lawsuit is brought against you, your policy may pay some investigation costs and legal fees to help defend you and your business. Without this cover, builders risk serious financial loss and damage to their professional reputation.

What’s not covered?

Like any insurance policy, Professional Indemnity for builders has exclusions—activities or events that are not covered. Some exclusions may include*:

• Any provision of design or engineering services, or responsibility for them
• Certification or verification of design compliance
• Breach of warranty arising from property development
• Costs to rectify, repair, replace, complete, or remediate any building work or element
• Defective work or products
• Property development
• Acting as a building certifier

A complete list of all exclusions can be found in your policy wording.

But I already have a Public Liability policy…

Tradie Public Liability insurance is a common type of cover for builders. It’s often required to get on-site, work as a contractor, or receive some trades licenses. But, it covers completely different risks than Professional Indemnity insurance.

Public Liability insurance covers legal fees and compensation costs if a customer, member of the public, or a supplier claims against you for injury or damage to their property as a result of your alleged negligent business activity. These policies do not cover the cost associated with professional negligence and project delays, which are covered by Professional Indemnity insurance.

If you already have Public Liability insurance, you may still want or need a Professional Indemnity policy to ensure your business is more fully protected.

Why would a builder need a Professional Indemnity policy?

For some types of builders, Professional Indemnity is mandatory.

As of August 2025, this includes building practitioners in the Northern Territory, specific classes of license in Queensland, specific building practitioner categories in Victoria, and building engineering contractors and building surveying contractors in Western Australia.

New South Wales will soon join this list, with Professional Indemnity insurance becoming mandatory for registered building practitioners in July 2026.

But even if Professional Indemnity isn’t required for builders in your area, having a policy could still prove crucial. Complex building projects, contract work,  construction delays, and supply chain disruptions are just a few reasons why building practitioners may decide to protect themselves with Professional Indemnity insurance.

A policy can help protect your business and finances by shouldering the cost of professional negligence and breach of contract claims, so that you’re not left out of pocket. It works alongside income protection insurance, theft cover, and tool and equipment cover to provide a well-rounded safety net for tradies.

Protect the business you’re building

Professional Indemnity insurance could help building practitioners manage the cost of common risks, so they can keep building across Australia. And with BizCover, busy builders can compare quotes, buy online, and get instant cover—all in minutes.

*Information current as of 27 August 2025. General in nature and subject to change. See policy wording for details or contact BizCover.

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