FAQs

Professional indemnity insurance is designed to give the professional person protection against financial loss resulting from liabilities for breach of professional duty by reason of a negligent act, error or omission.  Professional indemnity indemnifies you against claims by clients or third parties and will cover damages plus legal costs of defending the claim and for costs awarded against them.

Even in the best practice, mistakes can happen.  We live in a world where the expectation is that someone needs to be held accountable or responsible for project failures, unacceptable delay or the unexpected happening.

The limit of indemnity is the maximum amount the insurer will pay on the insured’s behalf on any one claim.  For an extremely large claim, the amount exceeding the limit of indemnity would be uninsured and to be borne by the insured.  Thus, it is important for the professional practice to consider their risk of exposure and purchase what is believed to be an appropriate limit of indemnity.

It is important that you maintain continuous PI insurance as the policy is on a “claims made” basis and any gaps in time could result in an exposure.  A professional practice must have a current policy in force when it first receives notification of a formal claim against it, or becomes aware of a circumstance which could give rise to a claim against it.  Continuity of PI insurance is therefore essential and should be maintained. 

Each insurance company’s PI is different.  It is important to choose an insurance consultant with experience in professional indemnity insurance.  Certain market polices may be less desirable on the basis of the specific terms and conditions.  These clauses may exclude or restrict cover for activities.

When deciding on the amount of PI cover to have, you should consider the scope of the work you are doing for your clients and the potential financial impact on them should it go wrong.  You know your business best and the sort of exposure it faces.  So there is no general rule of thumb for how much cover your business will need.

For the individual or practice there is also the stress, damage to reputation, and time wasted in defending a long running claim.  A PI policy also provides cover for legal costs and expenses.  This is important because liability claims are often complex and time consuming to handle.  While PI insurance offers a degree of financial protection, the best protection against these uninsured losses is excellent risk management to minimize the risk of claims in the first instance.