Taking out a basic professional indemnity insurance plan
Although a consultant or contractor typically does their best to complete jobs in good faith and to the best of their ability, it is almost inevitable that disputes of some form will arise from time to time. Although in many cases arguments can be sorted out amicably, sometimes clients can be minded to take legal action. This is why many professionals decide to have professional indemnity insurance in place as a safety net.
Imagine a management consultant making a series of recommendations which later turn out to actually harm a business rather than help it, or a computer contractor installing a network which crashes and loses a company money. These are brief examples of when the professional’s client may decide to sue.
This will mean defending a case in the courts, and civil actions are notoriously expensive when it comes to hiring a legal defence. Furthermore, if the case is lost there is always also the chance that compensation could be awarded in favour of the complainant.
Professional indemnity insurance, often referred to in business circles as PII, will typically pick up a policyholder’s legal bills in the event they are sued. This means they are effectively protected against massive legal expense in the event of a court case.
This kind of insurance normally protects against claims that the policyholder has committed a mistake, error, or act of negligence in their general day to day business. It can protect an individual contractor or a firm with a number of employees as a whole.
Normally a basic policy will also protect against claims someone has breached confidentiality or copyright accidentally, or even that they have defamed somebody through libel.
While hardly guaranteed, these circumstances are all real risks which can have massive financial implications for a business which does not have professional cover.
Professional indemnity insurance normally features premiums which are based on the size of the maximum payout on a policy, ie the highest amount the insurance company is prepared to pay towards legal costs and compensation in the event of a claim. This can be hundreds of thousands of pounds for smaller businesses or millions for larger firms.
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