Professional indemnity insurance is not only seen as useful by many consultants and external experts, but as essential in certain sectors. Management accountants who are practising members of the CIMA must have a policy in place and this means getting suitable cover from an established provider. The options are numerous and it can help to know a bit about some of the various aspects of CIMA professional indemnity insurance before you take the plunge and get a policy.
Of course there is no guarantee that a management accountant will experience a legal claim, although it does happen. A heightened sense of legal awareness in today’s society means that people may be more inclined to seek formal redress if they feel they have been wronged.
The risks of being sued were once more associated with American business but in reality anyone in the UK who feels they have been damaged professionally or financially or even personally by someone’s actions can launch a legal case.
Whether or not the claim is valid it will have to be defended. Even erroneous claims which are born out of malice have to be defended if they are formally lodged, and this is where professional indemnity insurance can be particularly useful.
Certain instances you simply cannot plan for, but may cost you a considerable amount of money if you don’t have cover in place. Complex legal arguments can go on for months or even years, so it can pay to have indemnity insurance in place to pick up the tab and to even cover the cost of any compensation which might be awarded against you.
In exchange for a regular premium, the insurance company will effectively pay the cost of your legal defence if you are formally accused of a mistake, error, omission or act of negligence. CIMA professional indemnity insurance also pays out in the event that somebody faces an accusation that they have acted dishonestly or that they have unintentionally breached intellectual property rights or confidentiality.
It’s also worth pointing out that many potential clients may not deal with a professional who does not have a form of indemnity insurance in place. For example some official bodies like a police authority or a council may not deal with a firm which does not have protection.
CIMA professional indemnity insurance can be bought from specialist cover providers which will supply a deal which matches what is required. Note that in some cases it can be sensible not to stick to the absolute minimum with this kind of cover – there is the risk of being under-insured if a firm takes out an inadequate payout limit which runs out in the middle of a legal case.
Members of the Chartered Institute of Management Accountants can protect their livelihood and reputation against claims sought against them with CIMA professional indemnity insurance. This protection is designed to provide financial assistance in the event of claims relating to statutory and contractual obligations.
Anyone who runs a business or provides a service will need to protect themselves against the unexpected. The Financial Services Authority sums up what professional indemnity insurance is: “a liability insurance that covers businesses in the event that a third party claims to have suffered a loss as a result of professional negligence”.
This means that the insurance can not only help protect you financially by providing financial help with legal and compensation costs, but can help keep your reputation intact too.
There are many variants of professional indemnity insurance and, often, a wide range of levels of cover within the specific policies too, so it is important that you choose the type of cover as well as the right level of protection in order to ensure that you have the policy that best suits your requirements.
Where to buy your cover?
Getting your CIMA professional indemnity insurance can be quick and easy if you go to a specialist provider. A professional indemnity insurance broker will have the knowledge needed in order to match your needs with the right policy, which is particularly important as your trade is within a niche sector.
What to consider when making your purchase.
When it comes to purchasing your insurance, do note that as with most insurance policies, generally you will be liable to pay an excess on your policy. Confirm with your broker what this will be.
And look out for any exclusions within the cover that could mean that your policy was useless. Again, check with your broker if you are not sure.
Make sure that you have an adequate sum insured so that there are no shortfalls that you would be financially liable for in the case of legal action.
Finally, no matter how well run a business is, mistakes can happen that could result in legal action being made against you. By having CIMA professional indemnity insurance in place, you can have the peace of mind that your business would not suffer should the unthinkable happen.
Do you know everything you should about CIMA professional indemnity insurance? If not then now is definitely the time to learn!
It is worth pointing out that CIMA insurance is mandatory which means if you do not have it, it is illegal to work for yourself as a CIMA member. The reason it is mandatory is because without the adequate insurance, the company you work for or yourself, could face financial ruin if a claim were to be made against you. As an accountant you put yourself at risk of a claim being made against you with every job that you take. This is especially the case if you work as a consultant. The advice that you give can make or break a company and obviously if it breaks it, you will have a very angry company wanting compensation!
How CIMA Professional Indemnity Insurance Works
A claim can be made against you for any of the following:
- Breach of Confidence
- Loss of Documents or Data
If you are accused of any of the above and you are found guilty, it could cost you thousands upon thousands of pounds worth of compensation. Even if you are cleared of the claim, it will still cost you hundreds and possibly thousands of pounds to defend yourself. It all depends upon the claim and the seriousness of the accused act.
If you are being accused of slander then the claim will be considered more serious than if you are accused of damages to the third party property (again depending upon how it happened). A breach of confidence will also be frowned upon as being a professional you are trusted and required by the law to keep everything you know confidential.
Sometimes you can do something wrong without even realising it. Perhaps you have missed something vital in your business plan. When the company followed your advice, because you had missed out vital information it caused the plan to go completely wrong and losses were made. Maybe you didn’t have enough information provided by the company for you to make the best business plan. If the third party forgets to tell you something and you go ahead and make a plan, if that plan then goes wrong the company will still blame you.
Overall it is never nice to think about the possible things that could go wrong. However, it is necessary if you are to protect yourself and your business. CIMA professional indemnity insurance will help to protect you against all possible claims that could be made against you.
A claim against you for loss of documents; negligence; third party injury etc – these are difficulties that any business could be challenged with at any time. The good news is that protecting yourself and your business with CIMA professional indemnity insurance does not have to be a costly or timely exercise, with the insurance often easily being bought online in minutes.
So what is it? CIMA professional indemnity insurance is protection designed for members of the Chartered Institute of Management Accountants which provides financial remuneration in the event of a claim relating to statutory and contractual obligations being made against you.
There are many types of professional indemnity insurance (PII) and, often, different levels of cover too within each product, which can help protect you and your business against the financial fallout of a claim.
It is important to remember that even the most clued up of business owners can still be susceptible to a claim being made against them, their company or any employee. This could at the very least see you face an enormous amount of personal strain as well as financial loss. However, professional indemnity insurance can help by providing financial assistance.
Deciding where to purchase your CIMA professional indemnity insurance does not need not be difficult, nor time consuming.
But, you do need to choose your insurance with care. Specialist providers of professional indemnity products can be a good choice as they will have expertise within this niche sector, enabling them to help find a policy that best suits your needs.
When it comes to buying your insurance, do check how much an excess would be. Most professional indemnity insurance policies will have an excess if you make a claim.
Remember that claim times after the incident could take some while, so if you are closing your company, ensure that you arrange “run-off” cover for a period of time after the business closes, in case a claim is made against it.
And always check that you have the sufficient amount of cover needed. To be underinsured is almost as bad as having no PII.
Finally, do make certain that the CIMA professional indemnity insurance cover is right for you before you sign up to the insurance. Look at any exclusions; the amount covered; excesses etc. Talk to your provider. Then enjoy the peace of mind that this invaluable cover can offer.