What Is Professional Indemnity Insurance?

If you’re a small business owner or an independent contractor, you’re probably busy trying to run your business as best as possible and never thought about getting professional indemnity insurance until now. 

Imagine this.

You’ve just landed a new client. You’re happy and ready to deliver your services to the highest standards possible. 

However, unfortunately, after working with you for a few weeks, this brand new client expresses their disappointment about your services. According to them, you didn't deliver what you promised. Worse, they claim that the solution you recommended has led to substantial financial losses. They've decided to make a claim against your business for negligence.

This situation could cost you thousands of dollars or more and damage your reputation, regardless of whether or not the claim is founded.

What has gone wrong? What could you have done differently?

While these are important questions, what matters most is that you have professional indemnity insurance.

Why? 

Because this is the only way to protect your assets, reputation, and business if such a situation ever arises.

Here’s everything you need to know about professional indemnity insurance in Australia.

What is Professional Indemnity insurance in Australia?

Professional Indemnity insurance (or PI insurance) is a type of liability insurance designed to cover businesses taking out this policy for any potential financial consequences that might occur due to their negligence, omission, or error. More specifically, Professional Indemnity insurance protects businesses that provide advice or deliver services in exchange for a fee against the potential financial losses their clients might suffer as a result of the advice or services they provide.

As a general rule of thumb, Professional Indemnity insurance policies cover claims for alleged negligence, error, or omission while a company delivers its professional services. 

What does Professional Indemnity insurance cover?

Now, let’s dive a bit more in detail into what Professional Indemnity insurance covers.

Civil liabilities claims

PI insurance provides cover for the following claims:

• Alleged errors, omissions, or negligence occurring in the performance of professional services
• Alleged breach of professional duty. This includes breach of confidentiality 
• Intellectual property infringement. This includes copyright or trademark infringement
• Slander
• Misrepresentation or fraudulent conduct
• Loss of or damage to your clients’ documents.

Bodily injury and property damage claims

If a client claims they have been injured or their property has been damaged due to your professional services, your PI insurance might cover your business for the claim depending on your policy.

Legal costs and expenses

Defending a professional indemnity claim in court can be extremely costly. PI insurance covers the cost of investigating the claim, attending court, and defending and settling the claim with all other parties involved.

Public Relations expenses

Let’s imagine you’re a recruitment consultant. You’ve written a job ad for a client of yours. This client is looking to hire a software engineer. The issue is that you inadvertently mentioned the preferred gender in the ad, which is illegal. One particular candidate decides to sue you for defamation. Not only could this be costly financially, but imagine the damage it could have on your reputation. 

Professional Indemnity insurance covers the costs associated with hiring a public relations consultant or agency to mitigate the consequences of your error and protect your reputation. 

Estates and legal representatives

If a claim is made against you after your death or after you’ve become incapacitated, PI insurance will provide cover for your heirs, legal representatives, and estate. This way, you can have peace of mind that your family and assets are protected no matter what.

Which Professional Indemnity insurance cover is right for you?

Did you know that some professions are legally required to have Professional Indemnity insurance in Australia?

That’s right. While Professional Indemnity insurance isn’t mandatory for every trade, it is for some.

Here’s a list of professionals who are required to have PI insurance to be able to practice:

• Accountants
• Agronomists 
• Agricultural consultants
• Architects
• Bookkeepers
• Building energy consultants
• Engineering consultants
• General insurance agents
• Health practitioners 
• Human Resources professionals
• Interior designers
• Loss assessors
• Management consultants
• Marketing specialists and consultants
• Real estate agents
• Registered BAS agents
• Risk management professionals
• Swimming pool inspectors
• Training agents
• Travel agents
• Veterinarians
• Work health and safety consultants.

The right cover for you depends on your profession, industry, and state. So, make sure to discuss your situation with your insurer to determine the best PI insurance cover for your business. 

Expert support from cover to claim

At upcover, we’re passionate about helping small business owners, sole traders, and independent contractors grow their operations and thrive. As a startup, we know exactly what challenges you might be facing on a daily basis. And we understand the risk of claims you face.

That’s why we’ve partnered with market-leading insurers to provide your business with the best Professional Indemnity insurance policy for your needs.  

We’re committed to being here with you every step of the way, supporting you and guiding you through the insurance process should a claim ever be made against you.

How to buy Professional Indemnity insurance?

You have two options here. 

1. You can spend days researching the market and navigating the different insurance policies available while also trying to define what insurer offers the best cover for your needs and within your budget.

2. You can jump on our instant quote generator, answer a couple of questions so we can better understand your specific needs, and receive your professional indemnity insurance quote instantly. Getting insured through our platform only takes a few minutes, and our team of experts is available around the clock to provide assistance and help you navigate the world of insurance. 

Frequently Asked Questions

Which businesses need Professional Indemnity insurance?

Professional Indemnity insurance is designed to protect businesses that provide professional services or advice to clients or customers in exchange for a fee. The business size doesn’t matter, and a claim could be made against you even if you’re a sole trader. Note that some professionals are legally required to have PI insurance.

What’s not covered by Professional Indemnity insurance?

Here are three types of claims that wouldn’t be covered under a PI insurance policy:

• Terrorism claims made against you
• Bodily injury claims when the injury doesn’t directly result from a breach of your professional duty 
• Claims made before your policy period. 

How much does Professional Indemnity insurance cost?

Unfortunately, there isn’t a one-size-fits-all answer to this question. It all depends on your business, the level of risks you’re exposed to, and your legal requirements. For instance, certain industries, like the accounting industry, are regulated and professionals need to be covered up to a predefined amount to be able to practice. 

What’s the difference between Professional Indemnity insurance and Public Liability insurance?

Public liability insurance or public indemnity insurance covers your business in the event one of your clients or a member of the public claims they were injured or their property was damaged as a result of your business operations. 

On the other hand, Professional Indemnity insurance covers businesses delivering professional services or advice in exchange for a fee against claims made by clients or customers for financial loss due to professional negligence.

In short, Public Indemnity insurance protects you against accidents that might occur on your premises or as a result of your operations, while PI insurance protects you against negligence, omissions, or errors that might happen while delivering your services.  

What is management liability insurance?

Management Liability insurance is designed to protect business owners and their management team against claims that may be made against them while running the business.

What’s the difference between Professional Indemnity insurance and Management Liability insurance?

PI insurance protects you as you deliver advice or professional services to your clients in exchange for a fee. Management Liability Insurance covers you, your executives, and your directors against personal liability claims such as mismanagement, misconduct, or legislative breaches.

How can I lodge a claim?

The best thing to do is talk to your insurer. And if you don’t know where to find the best professional indemnity insurance policy for your business, don’t hesitate to get in touch. We’re here for you and would love to assist you and help you receive a tailored professional indemnity insurance quote within seconds.