Professional mistakes can happen — even to the most experienced consultants, contractors or service providers. And when they do, the financial impact can be serious. Professional and indemnity insurance can help.
What can professional indemnity cover?
Professional indemnity insurance can help protect your business from some of the legal defense costs of claims related to professional mistakes, oversights or negligence — whether the claims are valid or not — up to your policy limits.
Here are a few examples of what professional indemnity insurance may help cover:
- Missed filing deadlines that cause a client financial loss.**
- Incorrect advice or errors in your professional work that cost a client money.
- Breach of confidentiality or a misuse of client data that causes them harm.
- Defamation, libel or slander claims related to your work.
- Intellectual property disputes involving original content or designs.
Even if the claim has no merit, business indemnity insurance can help cover legal fees, court costs and settlements so you’re not paying for everything out of pocket.
Professional indemnity insurance covers a lot, but it doesn’t cover every risk your business may face.
Here are some common exclusions:
- Bodily injury or property damage. Claims involving accidental physical harm to customers or damage to someone else’s property are not covered by professional indemnity. General liability insurance can be helpful in these instances.
- Intentional wrongdoing or fraud. If you deliberately mislead a client or break the law, those actions usually aren’t covered.
- Employee injuries. Injuries to your own employees are generally covered by workers’ compensation insurance.
- Cyberattacks and data breaches. If your business handles sensitive client information, you may need separate cyber liability coverage.
- Contractual liabilities. If you agree to take on extra risk in a contract (beyond what’s typical for your profession), it might not be covered unless you’ve arranged for additional contractual liability coverage.
Many business owners choose to bundle professional liability coverage with a general liability policy for broader protection over more business risks.
How much does professional indemnity insurance cost?
Professional indemnity insurance rates can vary based on your business type, industry risk, and coverage needs. Here are a few factors that can affect your premium:
- Your profession. Some industries face more risk than others. For example, accountants and consultants often have higher coverage needs than graphic designers or tutors.
- Business size and revenue. Larger businesses or those with more clients may pay more because there’s a higher chance something could go wrong.
- Coverage limits and deductible. Higher limits and lower deductibles typically increase your premium — but they also provide more financial protection.
- Claims history. If you’ve had insurance claims filed against you in the past, that could raise your rates.
Which professions need professional indemnity insurance most?
If your business provides services, expert advice or professional recommendations, it’s likely you could benefit from professional indemnity insurance. Even when you do everything right, a client might still claim your work caused them financial harm.
This type of insurance can be especially useful for self-employed professionals and business consultants who are paid for their expertise or advice. In some fields, indemnity insurance can be required by law or client contracts.
Some professions that often carry professional indemnity insurance include:
If your advice, analysis or deliverables help clients make decisions or run their business, there’s always some risk that things don’t go as planned — and you could get blamed.
What’s the difference between liability insurance and professional indemnity insurance?
While often used interchangeably, indemnity and liability insurance are distinct.
- Liability insurance can help protect your business if you’re responsible for someone else’s injuries or property damage. General liability insurance — a type of business liability insurance — can help cover you in these instances. Like professional indemnity insurance, it can also help pay for court and legal fees.
- Professional indemnity insurance can help protect businesses against claims of financial loss from alleged or actual professional errors. Professional liability insurance (also called errors and omissions insurance, or E&O insurance) can cover professional indemnity, but they exclude coverage for bodily injury and property damage.
Insurance companies separate these policies to ensure you get the coverage your business needs without paying for the coverage you don’t.
