What do you need to know about Professional indemnity insurance?

Blogs 8 Mar 2017

This blog explains the key things to know about professional indemnity to make sure your business is fully covered and protected.

Professional indemnity insurance is one of many types of cover that is crucial for UK business service providers. So how does the insurance protect a business, what companies might need it and when, and what should be considered to ensure levels of cover are right?

What is professional indemnity insurance?

This type of cover protects you against a series of factors concerning the business services you provide to your clients. This includes:

  • Legal costs and expenses incurred during a claim
  • Damages or compensation costs that might be awarded if you’re alleged to have given inadequate advice
  • Services or produced work that have caused your client to lose money

When might I need this cover?

Depending on your business, there are many times when you might need professional indemnity insurance. Some examples include situations involving:

Error – such as including factually incorrect information in a project you’ve done for a client

Negligence – such as client work you’ve carried out that hasn’t met the specified requirements, causing them to lose money or suffer an injury

Infringement – for example, an accusation being made that you’ve infringed a competitor’s copyright

Breaching confidentiality – for instance, an employee sending out an email to a supplier that contains confidential client information

What types of companies need professional indemnity insurance?

If you’re a business that provides a professional service or gives advice, which can cause your clients to lose money or suffer an injury, then you should consider purchasing this insurance. The cover can also be essential for companies that handle client data and are responsible for intellectual property.

It’s important to mention that, depending on your services, the insurance might be a condition of a contract that you form with a client. It might also be a requirement of an industry association’s regulations, of which you’re a member, so it’s wise to check with them.

Examples of businesses that should have this cover are:

  • Marketing companies
  • Architecture firms
  • Interior and graphic designers
  • Health consulting firms
  • Financial advisors.

Other companies include recruitment, management, and business consultants, IT contractors, like programmers and web developers, fitness professionals, such as personal trainers and dance teachers, as well as private tutors.

Without the insurance, businesses like these can be liable for thousands of pounds of legal fees and compensation payments, if a client makes a claim against them.

What level of cover do I need for my business?

If your business is a member of an industry association, having professional indemnity insurance might be a requirement for your company. In this case, the minimum level of cover you need will probably be decided for you. Otherwise, it’s important to remember that every business is different, so, when it comes to this insurance, there isn’t a one-size-fits-all solution.

To work out the cover you might need, you should consider the size of your clients and the size of the contracts you have with them. You should also think about the potential total costs you’d to need to make to defend yourself, if a claim was made against you. It’s a good idea to also consider any compensation you might have to pay, based on multiples of the fees your clients pay for your services.

How we can help you with business insurance to cover your company

Professional indemnity is one of many types of insurance that can be essential when running a business. 

From deciding what type of policy to purchase and what it should cover to knowing what provider is best for you, there’s a lot to consider when choosing the right insurance for your business. At FSB, we offer services for our members that can help you with this. This includes:

  • A team of insurance experts to advise you, saving you time and money
  • Higher levels of insurance for your business where possible
  • Comparison services to compare policies across the market
  • Free insurance and claims advice, no matter how complex


FSB Insurance Service

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