Professional Indemnity Insurance FAQ’s

Professional indemnity insurance can be an important type of cover that you may wish to obtain if your business provides advice or a professional service to clients. Below we have answered some of our most popular questions about this type of cover – take a look below to see if you can learn anything new!

What Is Professional Indemnity Insurance?

Professional Indemnity Insurance covers you or your business against claims relating to, errors, negligence, mistakes and breach of professional duty.

What Cover Is Usually Provided?

Professional Indemnity policies often include:

  • Libel & Slander
  • Loss Of Documents
  • Dishonesty Of Employees
  • Fidelity
  • Unintentional Breach Of Confidence
  • Infringement Of Copyright and Intellectual Property Rights
  • Previous Firms Or Previous Partners

How Much Cover Do I Need?

Only you can assess the amount of cover (limit of indemnity) appropriate for your business. In determining how much cover you need; it is important that a realistic view is taken of the potential damages and legal costs for which your business could become liable. Being under-insured can be almost as financially disastrous as being without insurance at all.

Often the level of cover that you require is determined by contractual obligations. You may have a contract with a client/customer or a new employer that states the minimum cover required. It would be prudent to check your contracts to see whether they contain clauses that dictate the level of professional indemnity insurance that you need. In addition, many professional bodies specify minimum cover limits.

Is Professional Indemnity Insurance Required By Law?

Professional indemnity insurance isn’t a legal requirement. But regulators and professional bodies may require your business to have professional indemnity insurance, so you should check whether it’s compulsory. As an example, professions like solicitors, accountants and architects may need it.

What Is The Limit Of Indemnity?

This is the maximum amount of money that a Professional Indemnity policy will pay out. It is often expressed as either ‘in the aggregate’ or ‘any one claim’.

What Is In The ‘Aggregate’ Or ‘Any One Claim’ Basis?

When arranging your professional indemnity insurance it is important to understand that there are two fundamental ways in which the cover can be arranged. This can be crucial when you are faced with a large or multiple claims. The two ways of arranging the cover are; aggregate basis and any one claim basis. With aggregate basis your claims are all paid out of the indemnity limit whereas with any one claim you are entitled to the fill indemnity limit for each and every claim.

What Is The Retroactive Date?

A retroactive date means that a Professional Indemnity policy can provide cover for work you have done in the past. There are two dates that are relevant for a Professional Indemnity policy. The first is the inception date (or renewal date) of the policy. This is the start date of the policy period. The second is the retroactive date, being the date that cover operates back to.

To explain how the cover operates, it is important to understand that Professional Indemnity policies are written on what is called a ‘claims made’ basis. This means that they provide cover for claims made against you during the policy period (ie after the inception or renewal date) that relate to work that you have done at any time after the Retroactive date.

How Do I Determine The Retroactive Date?

Normally the retroactive date is set to correspond with the date that the business was established, to provide cover for work done since the company began trading. In the case of a new start-up business, the date is often set to be the same as the inception date of the first policy that is purchased.

How Much Does Professional Indemnity Insurance Cost?

This depends on factors like the nature of your business, the type of work it carries out, and the level of cover you choose. You can easily check how much professional indemnity insurance will cost by running a quick quote. Businesses with higher levels of risk usually pay more for their policy.

If you have a question which is not covered within this blog post, please visit our Professional Indemnity FAQ page or contact a member of our team who will be happy to help. Alternatively, you can obtain a professional indemnity quote instantly online.