Professional Indemnity Insurance

Who Needs Professional Indemnity Insurance? *

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 >

What does Professional Indemnity Insurance Cover?*

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.

How Much is Professional Indemnity Insurance?*

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:

• 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?
• 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.

Why May I Need Professional Indemnity Insurance?*

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.