All You Need to Know About Professional Indemnity Insurance

If you are in the consultancy or service industry, a client may take legal action against your business for negligence or wrongful advice. If this happens, your business could be dragged into an expensive legal battle or be compelled to compensate the client. Professional Indemnity insurance protects your business against such claims.

Understand how Professional Indemnity insurance works and the benefits of taking out this cover.

What is Professional Indemnity insurance?

Professional Indemnity insurance covers you from claims resulting from wrongful advice, errors, omissions and negligence. This cover is best suited to companies who offer consultation services to their clients. This may be a law firm, clinic, building consultancy, accounting, architecture or engineering firm—to name a few.

If a client accused your firm of unsatisfactory work, breach of contract, overcharging or incomplete work, Professional Indemnity insurance may cover your legal costs and may often compensate the client if you lose in court.

What are the advantages of investing in Professional Indemnity insurance?

Compensation claims are expensive. Besides legal costs, you may have to compensate the client hundreds of thousands of dollars. As such, one claim could be enough to push your business into bankruptcy. Professional Indemnity cover will protect your business from such risks.

In Australia, Professional Indemnity insurance is mandatory for many occupations, such as   tax agents. Therefore, assess the regulations governing your profession to establish if you are legally required to have this cover. Some clients may also insist you have a Professional Indemnity policy in place before they will agree to work with you.

What considerations should you think about when taking out this cover?

The insurance broker

Work with an insurance broker with industry-specific experience. These insurance brokers will understand the risks your business may face in the future.

The amount of coverage

The scope of your business will determine the coverage you need. For instance, a large law firm will often require more coverage than a start-up. Consult with your insurance broker to ensure your business is not under-insured or over-insured. Additionally, check the premium to ensure it is within your business budget.

Also, understand what the policy covers. Does the policy cover all aspects of your work? Also, check whether the policy covers your previous work, and if you work outside your country of residence, make sure you are covered.

The combined coverage options

Businesses will often have other insurance policies such as General Liability, Commercial Property, Workers’ Compensation and Product Liability insurance. Managing these covers can be pretty challenging.

When investing in a Professional Indemnity policy, ask your insurance broker if you can combine this policy with your other business insurance policies, saving you time and money.

How can you manage your Professional Indemnity insurance cover?

Once you invest in the cover, keep in regular contact with your insurance broker to adjust your coverage as your business grows or diversifies. Consult your insurance broker about the best Professional Indemnity cover for your business.

There are certain insurers who specialise in particular professional industries, and, therefore, a tailored policy may be required depending on your circumstances. Endorsements, warranties and exclusions should be studied in detail before proceeding with any Professional Indemnity policy.

Finding an insurance broker who understands your business needs can be challenging. At Westralian Insurance, we take the time to fully understand your business and its requirements. Call us today!