Professional liability cover might form the central plank of many types of business insurance. The extent to which it might help safeguard your own particular enterprise, of course, may depend on just what goods and services you provide.
To help determine whether this might be the kind of protection you need, therefore, the following addresses a number of questions:
- what exactly does professional indemnity insurance do?
- what types of business might benefit from such cover?
- where might you buy it?
- does your occupation demand that you are legally obliged to have this cover?
The aim and purpose of professional indemnity insurance
Essentially, this type of cover is designed to indemnify you against allegations of professional negligence and the claims for compensation that may follow.
The extent of any such claim, of course, depends on the severity of the alleged negligence and the monetary value of the damages suffered. Claims of professional negligence, however, may assume quite considerable proportions. In view of this risk, indemnity is commonly offered for claims of up to £5 million or more.
Who needs it?
If, in the course of your business, you offer:
- any kind of advice or information, on which your customer acts (by doing something or not doing something) and that action subsequently results in loss or damage, you may be held liable for professional negligence;
- that test of negligence of course depends on what it would be reasonable for you to know in the normal course of your business – for example, advice on domestic wiring if you are an electrician, or financial advice if you are an accountant;
- if you lay claim to certain qualifications relevant to the services you offer, then the test of negligence may be stricter (given the greater knowledge and understanding you may be assumed to possess);
- in order to gain membership of some professional institutions, you may be required to hold what the regulatory body considers to be an adequate level of professional indemnity insurance;
- although some types of business – such as accountancy or other consultancy practices, for example – might be obvious examples where professional indemnity insurance may be called for, there are others (fitness instructors or personal trainers, for instance) where this form of protection may also be warranted.
Professional liability insurance may be an essential component of the cover needed for your business. It may not be relevant to every type of enterprise, but wherever there is some risk of a claim of professional negligence, indemnity may clearly prove worthwhile.