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Professional Indemnity Insurance for Small Businesses: What You Need to Know

Professional Indemnity Insurance

Professional Indemnity Insurance

Professional indemnity insurance is something any small business owner should investigate. As much as you might not want to think about insurance coverage and the risks you face when operating a small business, the below points demonstrate how important professional indemnity insurance is and how beneficial it could prove for you and your business.


Who Needs Professional Indemnity Insurance?

If you own your own business, are operating as a sole trader or working as a freelancer, there’s a good chance that you, and you alone, are responsible for any legal implications resulting from your work. It’s also fairly standard for any contracts you sign when providing a professional service to a third party, to contain a clause that stipulates you are legally liable for the work you are undertaking.

This makes professional indemnity insurance crucial for any business owners or freelancers who provide services that could potentially result in some form of legal action or a claim being made. Whether legitimate or unfounded, a claim made against you or your business can quickly become expensive, as investigating, defending and settling claims is not cheap. Any damage done to your reputation can also result in severe financial strain.

Never free from risk

Sadly, even if you’re the best at what you do and have a stellar track record of satisfactory to excellent work, you’re still not free from risk. One claim or legal complaint against you is all it takes for your financial situation and business to take a turn for the worst. But, luckily, professional indemnity insurance can help protect you against these professional risks, so you can go about your day-to-day work without having to worry about the ‘what ifs’.

What is Professional Indemnity Insurance?

Professional indemnity insurance is designed to cover you financially in the event a claim is filed against you because of any mistakes, accidents, or omissions that occur or were made as a result of your professional services. For instance, professional indemnity provides coverage for claims of the following nature:

  • Defamation
  • Incorrect advice/information
  • Property damage
  • Personal injury
  • Not fulfilling the terms of a contract. For example, not meeting a deadline or not delivering on promises made
  • Any financial losses that occur as a result of your services/any advice given

What is and isn’t Covered by Professional Indemnity Insurance?

To give you a better idea of how professional indemnity insurance works, let’s take a look at what is and isn’t covered. Exactly what is and isn’t covered in a policy of this nature will depend on the specific policy; however, the following things are usually included:

  • The costs associated with investigating, defending or settling a claim made against you or your business
  • The costs associated with property damage and injury claims made against you or your small business
  • Civil liability costs, including costs stemming from claims made for defamation, intellectual property theft, copyright infringement and etc.

While professional indemnity insurance policies are usually quite comprehensive, keep in mind that it doesn’t usually cover things insolvency, terrorism, intentional damage and etc. For a clearer idea of what will and won’t be covered in any potential policies, make sure you talk to one of our business insurance brokers at F.D Beck before you sign on the dotted line of a potential policy.

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