Professional Indemnity Insurance

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Professional Indemnity Insurance

Professional indemnity insurance provides protection for businesses that provide advice; from losses incurred as a result of claims for professional negligence, errors or omissions. It provides indemnity cover if your client suffers a loss directly attributed to your advice, actions or omissions.

What is Professional Indemnity Insurance?

Professional indemnity insurance is generally designed for professionals who provide advice or service to their customers or clients. Professional Indemnity Insurance protects professionals, consultants, contractors and businesses against legal costs and claims for any personal loss or damage. The claim may be for unprofessional advice, failure by the professional or professional firm to exercise the required level of skill, and/or breach of professional duty. Ultimately, professional indemnity insurance may protect your assets and your reputation should a claim arise.

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Any professional person or business who provides advice or a professional service for a fee should strongly consider Professional Indemnity insurance.

The list of professional and professional businesses particularly exposed to Professional Indemnity claims is broad and extensive. Many are listed here >

If your business provides professional services, professional indemnity insurance may protect you from claims made against you by clients and other parties where they allege that your professional advice, services, or designs caused them to suffer financial losses or other damages, and may cover your legal fees and any compensation payments that are ordered by a court.   Examples of situations when professional indemnity insurance may offer protection include:  

  • Negligence in providing poor advice or making a mistake or omission in your work
  • Using copyrighted material or other’s intellectual property without permission
  • Disclosing confidential or sensitive client information
  • Destruction or unauthorised access to a client’s documents or data
  • Defaming a customer by publishing false information that damages a client’s reputation
  • Legal costs in defending a claim and any compensation payments

  There are many situations in which you could inadvertently make an error or omission that could have disastrous consequences for your client, whilst data breaches pose a significant risk factor in today’s connected computer systems. Professional indemnity insurance is a necessity for businesses providing professional services where the consequences of (even unintentional) mistakes could be financially crippling.

The cost of professional indemnity insurance for your business activities depends on several key factors including:

    • The nature and scope of your business advice
    • Your business turnover and size
    • The size of the clients that you provide advice to
    • Amount of insurance cover your business needs

Business Scope and Professional Indemnity Insurance

Generally, the riskier the advice your business provides, or the higher the stakes for the recipient, the higher the cost of your premium will be.

For example, the outcomes from professionals providing investment, legal, medical or business advice such as financial planners, lawyers, doctors or commercial accountants present a relatively high financial risk or health risk to the recipient and may receive relatively high professional indemnity premiums.

On the other hand the advice from professionals such graphic designers, interior designers and bookkeepers typically present lower financial and health risks to recipients and may receive relatively low professional indemnity premiums.

Business Size and Turnover

However, as they say, SIZE does matter.

So, for example, a marketing and advertising business with 12 people will typically receive a larger professional indemnity policy cost than a sole trader in the same industry or an agency with a couple of staff.

Similarly, typically where a business is providing professional advice to large companies, governments or other high risk sectors/industries, professional indemnity premiums may be higher than when advice is provided to individual or smaller companies.

      • There are a number of exceptions to the rule. Medical advice is an example of advice to individual where professional indemnity costs are high. The stakes are high.
      • Another example of where advice is often provided to individuals, yet the cost of professional indemnity insurance is high applies to financial planners; as the insurance companies know from experience that the financial stakes can be high.

Professional Indemnity level of cover

Typically, professional indemnity cover for small and medium businesses is available in either $1million, $2million, $5million, $10million and $20 million.

      • Important considerations when determining what professional indemnity level to cover you need: The nature of the business advice, and the size of business, often determine the amount of cover ($) your business will need.
      • The general rule of thumb is the greater the potential damages from the advice provided and/or the larger the business, the larger ($) sum insured.
      • What is the worst thing that could happen from the advice you give, or don’t give, and what are the maximum damages that could be claimed for if clients suffered financial or health losses as a result of your advice?
      • How many client facing staff do you have providing advice? How experienced are they? Is staff turnover high?
      • Are you providing important advice to large companies, Government departments, councils, schools?
      • Are you operating in a high-risk advice industry such ad financial services, medical, aviation?

Important considerations when determining what professional indemnity level to cover:

      1. What is the worst thing that could happen from the advice you give, or don’t give, and what are the maximum damages that could be claimed for if clients suffered financial or health losses as a result of your advice?
      2. How many client facing staff do you have providing advice? How experienced are they? Is staff turnover high?
      3. Are you providing important advice to large companies, Government departments, councils, schools?
      4. Are you operating in a high-risk advice industry such ad financial services, medical, aviation?
      5. Some councils and government departments are already insisting on a minimum $20,000,000 limit.

So, how much will professional indemnity insurance cost you?

Whether you are a self-employed consultant or a professional advisory firm if you think you are not covered suitably or are paying too much for professional indemnity insurance the team at SMART may be able help. Call us on 1300 542 573 or contact us online and we’ll obtain a suitable quote for you. Professional indemnity Insurance cost for sole traders, and consultants and start from $380.

Some examples of pi costs are below:

      • Professional indemnity cost for some sole trader consultants providing low risk advice: from $350
      • Professional indemnity cost for I.T. consultant: from $600
      • Professional indemnity cost for environmental consultant: from $800

Please note: While cheap Professional indemnity Insurance can seem attractive on the surface it is important to ensure the policy covers you for the business activities you undertake, and the insurance policy and company will respond as intended when there is a claim.

Call us on 1300 542 573 or contact us online and we’ll obtain a suitable professional indemnity quote on your behalf.

Professional indemnity insurance is different from other types of insurance because claims may sometimes occur outside the insured period of the policy (depending on its terms). This is because cover may be provided both at the time a claim is made and for the period the insurable action occurred – this is because claims are sometimes made well after the work was done. Alternately, some claims may apply to work done before a professional indemnity insurance policy was in place.

To deal with these situations, some policies include run-off cover (which specifies a period after the policy ends during which it still provides cover) while others include a retroactive cover (which may apply to work done in the period before the policy was purchased).

You should have professional indemnity insurance that is tailored to provide cover for the period in which work was done as well as other times in which your business faces indemnity risks based on your particular circumstances.

Professional indemnity insurance may cover you for claims made by your clients claiming that your professional services or advice caused them financial damage or loss. Public liability insurance may cover the costs of a third party (usually members of the public that are not clients) who claim they have suffered personal injury or property damage as a result of your business activities.

The main difference between professional indemnity and public liability insurance is that the former may protect you against claims made by your clients that are associated with your professional advice and services, while the latter may protect you from accidents that can occur which affect the general public where someone is injured on your property or incurs damages that can be attributed to your business.

You’ve come to the SMART place for a competitive Professional Indemnity insurance online quote that is suitable for your professional risks.

Our business insurance brokers can provide you with a competitive quote and discuss your business activities to help you find suitable pi protection for your business risks.

For some consultants and sole traders with relatively low to medium professional indemnity risk we often provide you with a pi quote online after a smart conversation about your activities – without you having to fill out a proposal form. Friendly service and general advice is an essential aspect of the SMART approach to Professional Indemnity Insurance online quotes. Ask us about suitable pi cover for your profession, we are here to help.

No matter how skilled or careful you, as a professional consultant, contractor or business providing advice or a professional service, you are at risk of a dissatisfied client lodging a claim against you.

Claims against professional’s help fill our courts.

Professional Indemnity Insurance can provide cover for the cost of defending legal action against you and your business in addition to protection against losses in proceedings against you.

While all Professional Indemnity policies are different Professional Indemnity may also be able to provide protection for the action of your fellow directors, staff and contractors.

As it is often impractical for professional firms to have 100% control of the actions of all their staff at all times, professional indemnity insurance protection can help professional businesses function day in day out with increased confidence.

You may need professional indemnity insurance as professional indemnity claims against individuals and firms can be significant, often in the hundreds or thousands of dollars.

You can read more FAQs here.

The best way to get a quote for professional indemnity insurance is to speak to your Smart Business Insurance representative. You must provide sufficient information and disclose all relevant details about your business during this discussion so that you get appropriate coverage that is tailored to your specific circumstances at a competitive rate. Some of the information you may need to provide includes:

  • Your trade or profession
  • The legal structure of your business (that is, whether you are a sole trader, partnership or limited liability company)
  • How long your business has been in operation
  • Your expected annual turnover and/or largest client contract value
  • Any previous professional indemnity claims you have made
  • Other relevant details about your professional services

Discussing your business activities in detail with us may also enable us to recommend other types of business insurance you may require.

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