Insurance exists in order to protect a person or business from certain risks that can include anything from a natural disaster to property damage and theft.  However, when it comes to running a business, the risks can be far greater as well as carry a far greater cost.  You are not only responsible for what happens to your employees and your property, you are also responsible to the customers and other people who you come in contact with in the course of your business. A public liability insurance policy will cover some of these risks, but a professional indemnity insurance policy is tailored to your specific occupation.  Several occupations require you to have this type of policy, while it is optional to others.

What Does it Cover?

Many people assume that general liability and professional indemnity insurance are one in the same, and the two may even cover similar items. However, there are key differences.  A public liability policy typically covers claims of bodily injury or property damage.  For example if a customer were to slip and fall while at your business premises, due to a wet floor, a general liability policy would come into play.  There is some overlap with a professional indemnity insurance policy; however there are two big differences between the two, which lie in the cover professional indemnity insurance provides:

  • Coverage against negligence associated with your specific profession.
  • Financial damage protection (instead of just physical).

The main benefit of having professional indemnity insurance is in the case of any claims of negligence on your part. A professional such as an accountant is expected to provide an expert service and perform in a manner that follows a code of conduct.  If these rules are violated the accountant can be held legally responsible for damages done to clients’ finances or reputation.  In this instance professional indemnity insurance would be absolutely crucial.  Even something as informal as advice given over the phone which turns out to be incorrect can be held against you.

How to Get Cover

The first step is to see whether you and your business are eligible for professional indemnity insurance, as not all business types are eligible to be covered.  For example if you are a lawyer or an accountant you should not have a problem finding a policy at all.  However if you are a retail shop owner, then you may not be considered a professional in the sense of this insurance; it depends on what it is that you sell and the level of your expertise.  In fact depending on your occupation you may not need this type of policy at all, even if it is offered to you.  If you call an insurer and find that they do not provide professional indemnity cover for your occupation, then you can always shop around as it is possible another insurer will cover you.

It is important to also realize that professional indemnity insurance is available to business and individuals alike.  Just because you work for yourself does not mean you are safe from having a lawsuit filed against you.  In fact in most cases, professional indemnity insurance is more important for the self-employed, as you may have more of your personal assets invested in your business.  If you don’t have professional indemnity insurance, you will have to pay any costs for which you are ruled legally liable out of your business finances. Even if you work from home you may need to compare professional indemnity insurance quotes, or public liability insurance, or possibly both.

As with any insurance policy there are limits and restrictions, and professional indemnity insurance will only protect you up to a certain amount.  The amount of coverage you need depends on the type of business you run.  You may wish to contact several different insurers and research the best policy for you.  In order to run a business without putting the company’s finances at risk of indemnity claims, professional indemnity insurance may be an important option or even a necessity.

This article is by Zach, who blogs to share consumer info on professional indemnity insurance and public liability insurance for small to medium sized businesses.