What is Professional Indemnity Insurance?
Everybody makes mistakes – therefore covering yourself and your business is absolutely essential.
Professional Indemnity Insurance helps to provide cover for any legal costs or expenses that are incurred when defending claims of inadequate advice, services or designs to a client. It will also generally cover any compensation required to be paid to the client in order to rectify the mistake.
The types of business that regularly take out professional indemnity insurance include anyone from accountants and IT consultants to journalists, architects and financial advisors.
Small but Important
The fine print within your policy wording is incredibly important. You should always make sure that you’re familiar with it so try to make the time to read through it.
Not only will it help you to know exactly what you’re covered for, it’ll leave you better prepared to react to any claims as and when they do arise. Alongside this, the fine print will clearly state your own rights and what you are entitled to and protected against.
Many people find the language used in policy wording extremely confusing – however there are many resources you can use and websites that offer jargon free definitions and explanations like this page here.
Points to look out for in your Policy Wording:
Always ensure that you are covered for (at least) the following:
- Professional negligence (this usually involves making a mistake in a piece of work or in a service for or offered to a client – remember, everybody makes mistakes and it’s far better to admit this and be covered for it rather than simply assuming it won’t happen to you).
- Loss of important documents or data – again, this can happen to anyone at anytime so always be prepared. Insurance companies will require you to have appropriate measures in place such as secure storage of data – whether on or offline.
- Breach of copyright and/or confidentiality (even breaches that are unintentional still require extensive court cases and claims processes so insurance yourself against any potential action that could be taken against you )
- Defamation and libel (these type of claims can be particularly expensive so ensuring that you’re covered could save you financially)
- Loss of goods or money (this can be either your own or simply money that you are responsible for)
It really is important that you totally understand the language of your policy wording before you make a decision on whether or not to take out an insurance policy.
A few minor oversights by your insurance broker or by the insurance company could end up costing thousands of dollars in your premium cost, or when it comes time to make a professional indemnity claim.
Having the wrong figures could be the difference between a happy claim situation, or bankruptcy. So much sure that you understand the language of your policy wording – it could save you big dollars in the long run!
A more comprehensive explanation of the language of a policy wording can be found in this video below: