Professional Indemnity Insurance
What is Professional Indemnity Insurance?
Professional Indemnity Insurance protects you against claims made by dissatisfied clients.
If you find yourself in dispute with a client, your Professional Indemnity policy will cover the cost of defending any allegations or claims made against you, so you won’t have to pay lawyers fees.
If you’re in the wrong, the insurer will either pay the cost of putting your mistake right, or pay compensation on your behalf.
Have you heard of Umbrella Companies advertising blanket PI cover for its contractors? Follow the link to discover why this really isn’t as good as it sounds and may leave you exposed to a claim.
With ContractorUmbrella's chosen provider, we've made it easy for contractors to buy low cost Professional Indemnity insurance tailored exactly to suit your individual needs.
Professional indemnity insurance will:
- Cover you for claims made against you in the course of your work for clients
- Pay your defence costs, your liability to third parties and claimant’s costs
- Cover the cost of putting a mistake right if this will avoid a claim being made against you
- Meet the cost of your fees if a client refused to pay and threatens to counter-claim if you pursue what’s owed to you
Or put more briefly, it will:
- Cover the cost of rectifying a mistake
- Pay outstanding disputed fees
- Defend against invalid claims
Professional Indemnity will protect you from claims resulting from:
- Claims for negligence and breach of duty or care
- Negligent misstatement or negligent misrepresentation
- Claims for defamation
- Inadvertent infringements of someone else’s copyright
- Dishonesty of partners, directors, employees or self-employed freelancers
Professional indemnity in times of uncertainty
When things are difficult economically it is more important than ever to have professional indemnity insurance as under financial duress people are more inclined than ever to look for more reasons not to pay. Increasingly people will try to make claims with spurious and false allegations which will still take time, and money to refute. But if something is genuinely wrong in the service you provide, when times are tough, your customers will be less likely to let it ride and much more likely to take the trouble to make a claim against you.
Claims Example
A client has complained in writing. They’re complaining that a piece of work created by you has featured a logo that was incorrectly reproduced. They want reimbursing, and they want you to foot the bill - to the tune of fifteen grand. And you don’t want to lose them as a client.
You looked into professional indemnity insurance a few months ago. If you’re really honest with yourself you didn’t really understand it, and you’re not going to pay for something that you don’t understand, After all, you’re in business; you want to minimise expense.
Hindsight, however, can be a sobering thing and that insurance premium now seems like it would’ve been a small, sound investment.
Now your research into insurance cover tells you that if you’d had professional indemnity insurance in place, you would have been covered for the cost of rectifying your mistake. Your client could have been kept happy - and you would have been left in pocket.
Claims Example
John an IT contractor landed a contract with BT to analyse some data and things seemed to be progressing smoothly. But in the third month Ted, John’s line manager informed him that some of John’s work was deficient and that his error had produced faulty data. It would cost £5000 to re-run the work.
Fortunately Bob was covered by PI insurance and the insurers paid the costs of redoing the work involved.
Five Benefits of buying professional indemnity insurance
1. It costs you less
Legal advice is very expensive. Professional indemnity insurers will pay your legal costs when defending a claim and, if you’re found liable, any compensation.
Let’s face it. Budgeting for insurance is easier than budgeting for a trial.
2. Insurers have expert help
Insurers have a dedicated team of litigation specialists available to them.
They know what information is required to defend a claim. Most of us don’t.
3. Putting right your mistakes
Insurers will pay the cost of rectifying mistakes in your work, thereby keeping the client happy.
It’s cheaper than going to court. Putting mistakes right to avoid claims is cost effective for all concerned.
4. It may get you your money
Professional indemnity isn’t a debt collection service. But it may pay out if a client refuses to pay you, claiming you’ve been negligent in your work.
If you were to pursue your money, your client would make a counterclaim against you. The counterclaim would effectively trigger the policy anyway, so insurers act pre-emptively by paying your outstanding fee.
5. Peace of mind
Peace of mind may be a little clichéd, but it’s quite apt. We all make mistakes. Many people in business are sole traders. Their personal assets are at risk if a substantial claim due to their negligence is received. Professional indemnity insurance protects them from what could be a very expensive mistake.
