If you are in the advisory business and make a profit by selling your knowledge and skills, you may benefit from purchasing a professional indemnity insurance policy.
Professional indemnity insurance will protect you and your business from claims for financial loss or damages due to mistakes or negligence on the part of you, your business or the professionals who work for you. Professional indemnity insurance will also cover the legal costs of your defense and any damages awarded up to the cover limit of the policy.
Many professional bodies are required by law to have this type of coverage as part of their authorization or as a regulatory requirement. Solicitors, accountants, architects, insurance brokers and financial advisers are just some of the professionals who will benefit from professional indemnity coverage.
An important condition to bear in mind when considering professional indemnity coverage is that it is usually on a claims-made basis — meaning that the policies will only cover claims made when it is ‘live’ and up to date. Therefore, if you decide to cancel your policy for whatever reason — close of business, retirement — you may have to arrange ‘run off’ coverage to ensure you are protected in case of a claim. Indemnity claims have no expiry date and even if you have been retired or closed for a number of years, you may find a nasty surprise waiting.
Keeping good records and ensuring all projects are well documented is one way to avoid this type of claim and check with your broker or insurance adviser to make sure you understand everything in the small print before you make the commitment.
Professional indemnity coverage differs from general liability insurance as it covers against financial loss or damages as opposed to injury and damage to property. General liability insurance will not cover you or your business in the event of a mistake or misrepresentation, so ensure you have the proper coverage for your needs.