Professional indemnity insurance


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Frequently asked questions

  • What is professional indemnity insurance?
  • Do I need professional indemnity insurance?
  • How does professional indemnity insurance work?
  • What other business insurance might I need?

What is professional indemnity insurance?

Professional indemnity insurance, often referred to as "PI insurance", is designed to cover the cost of paying compensation to a client because your service, advice or designs have caused damage to their reputation, or lost them money in sales or a corporate partnership.

Do I need professional indemnity insurance?

Not every business needs professional indemnity insurance – it isn't legally required. Usually it applies to businesses that offer knowledge, skills or advice as part of their work. It might be needed by a self-employed person like a consultant or an accountant, or by a company doing certain types of work.

Some professionals will need to have professional indemnity insurance if they want to be a member of their professional body, or their industry might have regulations that require them to have the insurance. These professionals include:

  • solicitors
  • accountants
  • financial advisors
  • architects
  • chartered surveyors
  • some medical professionals

You could also find that your contract with a client company requires you to have this cover in place.

The kinds of businesses that might need professional indemnity insurance include marketing agencies, PR consultancies, management consultants, web agencies and design companies. These are all organisations whose advice could lead a company to change its strategy.

How does professional indemnity insurance work?

It's important to know that your professional indemnity insurance provider will only cover you for claims made during the time you are insured. So, it not only matters when you give the advice, but also that you have cover in place when the claim is made.

For example, if you bought a year's professional indemnity insurance in January 2018, and in February 2019 you give advice to a client that ends in a claim, you would not be covered for that claim. Nor would you be covered for any advice given before the policy was bought.

Still have questions? Your provider should be able to walk you through the policy to help you better understand the insurance.

What other business insurance might I need?

As well as professional indemnity insurance, you may need additional insurance for your business, such as:

  • Employers' liability insurance - if your business has one employee or more, it's a legal requirement to have this insurance. It covers you if your employees are injured or become ill as a result of working for you.
  • Public liability insurance - covers your business if someone gets injured on your business property or if you damage someone else's property while working.

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