Professional indemnity insurance covers a business when a client claims it made a mistake, gave negligent advice, or failed in its professional duty, and seeks compensation as a result. It is a core cover for anyone who sells expertise rather than goods.
What it covers
The policy pays the legal costs and any damages awarded when a client alleges an error, omission or breach of professional duty in the work you delivered. It typically covers negligent advice, lost or damaged client documents, and defamation arising from your work. Our guide to business interruption covers the related risk of lost income, while professional indemnity addresses the liability side.
Who needs it
Consultants, architects, accountants, designers, IT and marketing professionals, and many contractors rely on it, because a single claim can exceed the value of the project. Some clients and regulators require it as a condition of engagement, and it is often expected in regulated sectors.
How it is structured
Cover is usually written on a claims made basis, which means it responds to claims made during the policy period, regardless of when the work was done, provided the policy was in place at both the time of the work and the claim. This is different from public and employers’ liability, which are usually occurrence based. Our guide to public liability vs employers’ liability explains those, and the distinction matters when arranging cover.
What to check
Check the limit of indemnity, the excess, and any exclusions such as deliberate acts or certain types of contract. Tell the insurer about past work through the retroactive date, and keep cover in force even after a project ends, because claims can arrive later. If a claim is mishandled, our guide to complaining and the Financial Ombudsman are the routes to challenge it.