Determining the Level of Cover Needed for Professional Indemnity Insurance

Professional indemnity insurance is a type of business liability insurance. From independent freelancers to multinational corporations, PII covers businesses against compensation claims from clients alleging negligence that has led to a loss. It covers businesses that provide services, advice, or consultancy.

The cost of successful claims can be devastating for companies. There’s legal representation, court fees, damages awarded to unhappy clients, and the cost of setting things right. By investing in PII, business owners can mitigate risks associated with these claims, potentially saving themselves and their businesses from financial trouble. 

If you or someone in your company makes a mistake, however small – it could cost you. If the mistake costs a client a large amount of money or damaged their reputation significantly, then you could be liable for a huge sum. For most businesses, it’s not a risk they can afford to take. 

You owe your clients a duty of care. You must act with a ‘standard of care and skill’ that is reasonable for a competent member of your profession. If you, or a member of your team breach this duty, your client could make a claim against you. 

PII covers businesses against claims over the following:

Professional negligence – making a mistake in the course of your work or providing incorrect advice.

Defamation – sharing or supporting libelous statements about your client.

Breach of confidence – sharing sensitive information about your client or the project without permission.

Breach of copyright-infringing on any copyright, trademarks or intellectual property.

Loss of documents – losing or damaging documents belonging or relating to the client.

Employee dishonesty – employees acting maliciously towards your client, leading to financial loss.

In the event that a claim is made, professional indemnity insurance can cover your legal fees, compensation costs, and the cost of rectifying the mistake. In some cases, this may include PR and crisis management services. 

PII isn’t a legal requirement here in the UK, but many professional bodies expect their members to have adequate cover. Some of these bodies do specify how much cover is needed, while others just state that cover is a must-have. The Architects Registration Board (ARB), for example, requires a minimum level of £250,000 cover value. RICS also provides guidance for chartered surveyors. 

Some clients may also stipulate a certain level of cover before working with you. If they don’t, you can always ask them how much cover they would expect you to have. 

The amount of cover your business needs will depend on several factors. If your industry doesn’t define a minimum amount (and even if it does), you should think carefully about how much cover you’re likely to need. 

Consider the type and size of the clients you work for, and how much a potential mistake could cost them. Your level of cover will need to meet this, plus the cost of additional compensation, legal fees and more. The lowest level of cover you can purchase tends to be around £50,00 for most insurance providers.

You should also consider the country or countries where you offer your services or advice. Your PII insurance contract will need to comply with any limits or requirements of those countries. Most indemnity insurance cover can be separated into UK, EU, worldwide excluding the USA & Canada and worldwide. 

Thinking about worst-case scenarios can help you plan effectively and ensure you have the right level of cover so that you aren’t left out of pocket. 

If you currently have PII, is the level of cover enough? It might be time to revisit your policy. 

For help determining exactly how much PII cover your business needs, speak to Dover Street Insurance Brokers today. Let us help your business thrive.