Protecting your business with professional indemnity insurance

April 30, 2010 · Filed Under Professional indemnity insurance 

Professional indemnity insurance (PII) may help protect your business if a mistake on your part causes a client to sue you for damages.


As a professional businessperson, you may take a lot of pride in providing the best level of service you can to your clients. However, you can’t be 100% sure that your actions will never unintentionally cause your client serious financial problems.

This could be because something you or one of your employees has done while providing services has in fact resulted in financial loss or reputation damage of one form or another for your client.

If your client takes you to court, professional indemnity insurance (PI insurance or PII) typically includes funding for legal bills whether or not the actual claim itself is successful. It would typically also meet the costs of any damages awarded, providing of course they related to an insured risk.

Cover for financial loss

Amongst other things, financial loss may happen as a result of:

  • bad advice given by you that led to a loss of income for your client’s business;
  • your client having to reduce output or shut down as a result of faulty workmanship on your part (e.g. in computer systems);
  • you being unable to deliver within agreed timescales;
  • your client having to bring in other professionals in to get the situation back in operation.

Other less tangible causes may include:

  • libel or slander;
  • defamation;
  • breaching confidentiality rules;
  • loss of data;
  • infringement of copyright.

PII will usually cover you for these actions and many others provided that there was no intention to cause damage or break the law on your part.

Not mandatory

For some businesses like accountancy, indemnity insurance for professionals is compulsory. For those other businesses where PII is optional, some clients may still prefer to use the services of professionals who are covered by PII as they may typically regard it as a sign of professionalism and responsibility.

In a competitive market, having a few more plus points on your proposal may do no harm.

Why bother?

Professional indemnity insurance, like any insurance, may be something that you never have to call on. As such, it may seem tempting to do without it, save some money and take a chance. On the other hand if something does happen, it may seem like a very cost effective option indeed.


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