Why Professional Indemnity Insurance?
We have insurance to mitigate against the damage caused by risks. If you are self-employed or own a business you may not be considering the risk should a client make an allegation against you for inadequate service. This is where professional indemnity insurance comes in.
What is Professional indemnity insurance?
Should a client make a claim against you for inadequate service or for making a mistake that leads to financial loss, professional indemnity insurance can cover compensation claims, if a business is sued by a client, as well as cover for the legal costs and expenses in defending the claim.
Do you need professional indemnity cover?
A business that would usually take out this kind of cover will be those that provide advice and offer a professional service to clients. It also includes businesses which handle client data and intellectual property. Many business types will fit into the category and will needing professional indemnity cover.
It is not considered a compulsory insurance which you need to take out by law however, if your business provides advice or a professional service to clients, this type of cover will be extremely beneficial. You may find that clients will contractually oblige you to take out this cover and will not carry out business with you, without it. Regulatory or professional bodies may also require some professionals such as solicitors, financial advisers, architects and chartered surveyors, to name a few, to take out this type of insurance. A good professional indemnity policy helps to provide you and your clients with peace of mind.
Other professions which may want to look at professional indemnity insurance include; consultants, IT professionals, private tutors, recruitment professionals, fitness professionals and dance teachers.
You will, more often than not, enjoy a good relationship with your clients but mistakes can happen and the dynamics of that relationship could change overnight. Should your client see you as negligent, responsible for financial loss or that you have provided an inadequate service they are likely to seek compensation from your business. With professional indemnity cover in place, your legal fee can be paid for and the client’s compensation fee covered meaning your business can remain safe and secure without the worry of a devastating financial loss on the business.
What is the cost?
Costs will vary with the provider but it could save you a considerable sum should a claim ever be made against you. When it comes to the cost there are several things to consider. You would need to consider the level of cover you need and the type of work you do. As a rule of thumb, businesses that face higher levels of risk will pay more for their professional indemnity insurance.
Whether you’re a business owner, a sole trader, self-employed, large or small, without professional indemnity cover you could be left in a vulnerable financial position in the event a claim is brought against you. Although most professionals strive to provide the best service possible, people do make mistakes. Knowing that adequate insurance is in place will give you peace of mind that your business is covered.