What do Business Owners need to know about Professional Indemnity Insurance
Professional Indemnity Insurance protects businesses against claims that their specialist services or advice allegedly resulted in financial loss to their clients or customers. Clients can claim compensation for loss of income or expenses that are the result of mistake, omission, incorrect information or negligence to adhere to professional standards. Any business that provides advice or services in any professional capacity should consider professional indemnity insurance. Some of the professions covered by PI include but are not limited to accountants, health professionals, engineers, real estate agents and brokers, consultants, travel agents. Professional Indemnity Insurance protects businesses against claims that their specialist services or advice allegedly resulted in financial loss to their clients or customers.
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- Does my Business need Professional Indemnity Insurance?
- What will affect Professional Indemnity Insurance Cost?
- What is the right Professional Indemnity Policy for my Business?
- How does Professional Indemnity differ from Public Liability Insurance?
Does my Business need Professional Indemnity Insurance?
It is not compulsory for a number of professions, but in this day and age of commercial litigation, all businesses that provide professional advice or services are advised to take professional indemnity cover. Having PI insurance can be the difference between a bump in the road and a costly legal battle that compromises your business and your reputation. There are many different options and level of cover available in Australia, so talk to a certified broker or insurance agency about taking out professional indemnity insurance for your business.
What will affect Professional Indemnity Insurance Cost?
There is no blanket professional indemnity insurance cost and cover varies between policies, providers and industries. The key issues taken into consideration to determine the cost of your policy include:
- Type of Business. If you are an independent contractor or consultant, the cost of your policy will be much less than a multinational company with multiple employees.
- Industry Requirements. The statutory requirements in many industries prescribe a minimum limit of PI cover and determine the boundaries of your particular policy. For example, certifying structural engineers in the Northern Territory require a minimum limit of $1,000,000. The minimum coverage is not always sufficient and can leave you dangerously underinsured and susceptible to financial loss.
- Industry. The type of work you undertake and where you conduct it affects the cost of your policy. The greater the size and value of the project and more services you provide, the more cover you will need.
- Risk. The risks associated with your business will be assessed in order to determine the potential for loss, injury or damage that could result in a claim being made against you. This differs considerably between industries, professions and businesses and generally requires an individual assessment.
What is the right Professional Indemnity Policy for my Business?
Choosing the right type of professional indemnity insurance is a complex decision that requires serious consideration and expert advice. Working with an insurance broker or company that you trust is of utmost importance. Finding a broker that understands your industry and has a thorough understanding of the risk you carry will ensure that you are adequately covered to protect your business and reputation should something happen. Before choosing a policy, read the fine print carefully and make sure you know where you stand. The following particulars may differ between policies and insurers:
- Limit of liability: the maximum amount of compensation that will be paid for each claim that is covered by the policy.
- Policy exclusions: make sure you understand exactly what events are not included in the policy are so you aren’t caught by surprise down the track.
- Who exactly is covered?: Have a clear understanding of exactly which employees and related entities are covered for their professional services under the policy.
- Dates for inclusion: Does your policy cover claims made in regards to events that occurred before the policy was in effect?
- Conditions for claiming: Keep abreast of any changes made to the policy during your period of coverage including those in relation to alteration to risk, cancellation, limits and any other changes.
How does Professional Indemnity differ from Public Liability Insurance?
Businesses must understand the distinct differences between professional indemnity and public liability in order to make sure they are adequately covered for any and all claims that might be made against them. The key issue separating the two forms of insurance is how duty of care is defined. Public liability refers to your general duty as a business or professional to conduct yourself in a responsible manner towards your clients and their property. It is vital to identify, manage and prevent the risks in your business. Your duty of care could come under scrutiny if a client is physically injure, are discriminated against or have their property damaged. Public liability insurance covers your business for legal fees and resulting compensation if a claim is made against you in this respect. Professional indemnity insurance deals with breaches of professional duty. Professionals must stick to specific professional standards and ensure that the advice and service they provide is accurate and complete. If you are found to have acted in a negligent way or breached your duty of care, you may be liable to pay compensation for any financial or material losses to their business. Professional indemnity insurance covers you in this instance.
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Frequently Asked Questions about Professional Indemnity Insurance Cost
Q: Who is considered a professional?
- A: A professional refers to individuals across a wide range of industries who have been trained in their field and give expert advice or services to paying clients. Professionals usually have to adhere to strict professional standards for their industry and include lawyers, accountants, engineers as well as a variety of consultants, advisers and analysts. Real estate/tax/travel agents, marketing and graphic designers, beauty therapists, employment agencies and even marriage celebrants are advised to get professional indemnity insurance in this day and age.
Q: I am an employee of a professional company. Do I need my own professional indemnity insurance or am I covered under my company’s insurance policy?
- A: Businesses are responsible for protecting their employees and related entities with professional indemnity insurance. Familiarise yourself with what is and isn’t covered in that particular plan. Independent contractors and consultants are in charge of providing their own PI insurance, so it’s a good idea to seek expert advice to ensure you are adequately covered.
Q: Do I need both professional indemnity insurance and public liability insurance?
- A: Yes. Public liability insurance covers you and your business for general duty of care while professional indemnity insurance specifically covers you for breaches to professional conduct.
Q: What am I protected against when I have professional indemnity insurance?
- A: Some of the claims policyholders have been liable for include: breach of duty (including duty of confidentiality), defamation, loss or damage to documents, dishonest acts or omissions, misleading or deceptive conduct, infringement of intellectual property.
Q: What does professional indemnity insurance provide for me?
- A: First and foremost, PI insurance provides peace of mind, knowing that you have minimised the risk to your business and personal assets in the event that a costly PI claim goes to court. The costs that are covered include claims investigation costs, legal fees and compensation payouts. Please be aware that specific costs and coverage amounts will differ depending on your particular policy.
Professional indemnity insurance is a proactive measure that provides peace of mind in the event of a negligence claim being made against you or your business. For a relatively small annual fee, you can protect your business, your employees and your assets from the devastating effects of a costly legal battle.Back to top