Why Does Your Business Need Professional Indemnity Insurance?
By: Barry Shereston
Let's be clear not all businesses require this type of Business Insurance. It should be considered for businesses that gives advice or offer a professional service as part of their offering.
So if you are setting up or have an existing business you should consider carefully exactly what level of cover you require before launching into any policy.
Lots of professional services businesses are required by their professional membership body to have Professional Indemnity (PI) insurance. These would typically include, financial advisers solicitors, mortgage intermediaries, architects, accountants, insurance brokers and. Many consultants, in creative industries like Public Relations, advertising agencies, and web designers also choose to have this type of insurance.
This means that most professional bodies have arrangements with one particular insurer to provide this type of insurance. If you are a member of a professional body such as the Law Society, or RICS, in the first instance I would always recommend that you approach these people. Also some regulatory bodies insist that you have legal cover.
There are several benefits. Straight away the insurer will be in tune with your type of business. So it might cut down on the amount of paperwork.
But it is always worth shopping round. After all you are trying to get the best cover for the best price.
So why might you need this type of Business Insurance? If you operate a service Professional Indemnity (PI) insurance protects your business against claims for mistakes or in some cases against negligence. So in effect it will cover your legal expenses.
There are various reasons why there might be a PI claim against your business. A web designer might have inadvertently have used an image which was copyrighted. Another example might be if an architect drew a set of plans with the wrong measurements, which at the point of construction meant the development was built in the wrong place.
Depending on the level of covered you have agreed with your insurer the legal fees and the fine might be covered by your insurer.
Minimise claims with good documentation
Keeping good paperwork will help keep your house in order. This will mean that if you need to defend a claim, the proper paperwork, which is outlines everyone's responsibilities will help support your defence.
This is a specialist field and requires specific knowledge. Make sure that you consult with your insurance brokers.
Getting the proper level of cover
If for any reason you are thinking of cancelling your policy, either due to retirement or moving to another insurer it always worth considering that any claims refer to when your policy was in place.
This means if you move your policy to another insurer you either need to arrange with the new insurer to accept previous incidents or arrange a 'run-off' policy.