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What is Professional Indemnity Insurance?
When you are running a small business creating a positive impression to your clients is essential. Unfortunately, when you run a business that provides advice or a service there may come a time when things don’t go to plan and a client is dissatisfied with your business’ services. They may have suffered a loss or incurred damages due to an act, omission or a breach of professional duty by you during the course of your business activities.
The threat of a potential claim can not only have a devastating impact on your financial situation, but also to your reputation. In today’s economic environment this is a common reality, something which your business needs to have protection for.
It costs time and money to defend yourself against a claim. You could be faced with forking out hundreds of thousands of dollars (if not more) if there is a demand for compensation. Even if you are not found liable, the costs of defending your case could severely impact your business.
This is where Professional Indemnity insurance (PI) provides protection for yourself and your employees. PI cover gives you peace of mind knowing that you will have the funds to defend the claim and pay any compensation awarded.
What does Professional Indemnity Insurance cover?
Professional Indemnity insurance is designed to provide cover for legal costs and claims for damages that may arise from an act, omission or breach of duty during the course of your business activities. It will also cover any associated investigation costs from professional bodies.
A Professional Indemnity insurance claim could occur from negligence while performing your professional services, resulting in a third-party experiencing a loss, either financial or physical including property damage and personal/bodily injury which is not covered by the ACC.
Some examples of how a claim for negligence may occur include:
- Giving the wrong or inadequate advice to a client
- Unable to deliver promised services or act in accordance to instructions from a client
- Failing to advise a third party
- Accusations of libel, slander or defamation
- Losing or damaging important documents
Professional Indemnity Insurance provides cover for:
- Damages and claimant costs awarded against the insured
- Legal and defence costs
- Claims investigation costs
- Injury attendance costs
- Public relations costs
What is NOT covered:
- Intentional damage
- Fraud and dishonesty
- Known claims and circumstances
Choosing the Right Policy
When it comes to selecting the right level of PI cover to suit your business there are a few things you need to consider. These include:
- Are their any statutory requirements for your profession?
- If you are a member of a professional body or association do they have a set requirement to hold PI insurance? If so, what is the minimum level of cover you are required to have?
- Do any of your contracts stipulate that you must have a certain level of PI insurance?
- Think about what could go wrong, what are some of the potential risks and how much would they cost to rectify the problem?
- Could you afford the legal and investigation costs if any action was taken against you?
Review your insurance regularly to assess the risks you are exposed to and ensure you have the right level of cover in place to protect your business.
How much does Professional Indemnity Insurance cost?
Like most insurance policies there is no such thing as a one size fits all, with each and every business having their own unique risks and needs. These are some of the key factors that can impact the pricing of a Professional Indemnity Insurance policy:
- The size of your business and how much turnover it makes
- The type of business you operate- the riskier the industry or occupation the higher the premium
- The level of cover you select
- Previous claims history
The traditional professions associated with taking out Professional Indemnity insurance such as doctors, lawyers and accountants have shifted to include many more different types of occupations.
On average, business owners paid $76.25/month for their Professional Indemnity Insurance in 2018.
As more businesses provide professional services and give advice, it becomes a requirement to protect against legal costs and claims that may arise for damages caused from a breach of professional duty.
To receive an accurate quote for how much a Professional Indemnity insurance policy may cost your business, simply click on the button below to compare quotes.