Professional Indemnity Insurance: Protecting You From Bad Advice
Have you recently taken your expertise in a certain industry and turned it into a consulting business? Do you provide software as a service (SaaS) or build peer-to-peer marketplaces? In many cases, you will need some form of professional indemnity insurance (PI).
Even if you are the best in your field, there is always a chance that you could make a mistake in your work or provide bad advice to clients. PI can protect you from the financial fallout of these types of mistakes, as well as from any legal action taken against you.
What is professional indemnity insurance?
Professional indemnity (sometimes called Errors and Omissions) is a type of insurance that can protect individuals and businesses from financial damages caused by errors or negligence in their professional work. It can also provide coverage for legal costs if you are sued for these same reasons.
Say you are a web developer and you build a website for a client. Unfortunately, due to an error on your part, the website does not work properly and the client loses money as a result.
Your PI policy would cover any legal fees associated with defending yourself against the claim, as well as any damages that are awarded to the client. That means even if you are found liable for the mistake, your PI policy would pay out and you would not have to worry about coming up with the money yourself.
What does professional indemnity insurance cover?
PI generally covers any legal liability arising from your professional activities. That includes things like giving bad advice, making a mistake in your work, or breaching a contract. It can also cover you for defamation claims or copyright infringement.
Each policy is different, so it’s important to read the fine print and make sure you understand what is and is not covered. For example, some policies will not cover you for work that was done outside of Australia, while others may exclude certain types of service altogether (such as medical work).
In general, it will help you with the following things.
- Civil liberty claims: This type of policy can cover you for any wrongful accusations made against you. For example, if you are accused of defamation or slander, your PI policy would help with the legal costs associated with defending yourself.
- Bodily injury and property damage: If you are sued for accidentally damaging someone’s property or causing them bodily harm through your work, your PI policy would provide coverage.
- Public relations expenses: Some policies will also help with the cost of damage control if your business suffers a PR disaster. For example, if you make a mistake that gets widely publicized, your policy may help with the cost of hiring a PR firm to help improve your image.
- Legal fees: As mentioned above, PI can also cover the legal fees associated with defending yourself against a claim. That includes things like court costs and attorney’s fees.
- Estates: If you die or become incapacitated, your PI policy can help cover the cost of your estate. That includes things like funeral expenses and any debts that you may leave behind.
Critically, not all of these will be covered by every policy. So if one of these is particularly important to you, make sure to check that it is included in the coverage.
How to know what coverage you need
The amount of coverage you need will depend on the type of business you have, as well as the size and scope of your operations. If you are a small business owner, you may only need a few hundred thousand dollars in coverage. But if you are a large corporation, you may need several million.
In addition to the size of your business, you also need to consider the type of work you do. If you are in a high-risk industry, such as construction or healthcare, you may need more coverage than someone in a low-risk industry, such as accounting or consulting.
You also need to consider the countries in which you operate. If you only work in Australia, you only need coverage for those laws and regulations. But if you work in multiple countries, you will need coverage for each.
Consider the following questions:
- What is the potential financial impact of a mistake?
- How many clients do you have?
- What is the likelihood that you will be sued for negligence?
- What are the laws and regulations in your industry and country?
The answers to these questions will help you determine how much coverage you need. You should also speak to a professional indemnity insurance broker to get expert advice on what coverage is right for your business.
What to look for in an insurance provider
Don't just check any old shop though! You want to make sure that the provider is reputable and has a good track record. There are many ways to do this, but two of the most important things to look for are accreditation and reviews.
Accreditation means that an insurance provider has been vetted by a respected third party and meets certain standards. For example, in Australia, there are two main accreditation bodies: APRA (Australian Prudential Regulation Authority) and ASIC (Australian Securities and Investments Commission).
Reviews are another way to gauge an insurance provider's reputation. You can read them online, or speak to other businesses that have used the provider in the past. When looking for a PI policy, it's important to find a provider that will be there for you when you need them most.
The startup specialists
That's where UpSure stands out. We don't just know startups – we've built them ourselves. We understand the unique challenges and risks they face, and we have tailored our policies to address them.
Our team of startup experts can help you navigate the process of choosing the right PI policy for your business. We'll ensure you are adequately protected so you can focus on what you do best: growing your business.
Get in touch with us today to discover more about our professional indemnity insurance policies, or sign up for free to get started.
