If your business provides advice, designs, plans or professional services, a mistake or oversight could cost your client money and lead to a claim against you. Professional indemnity insurance (PI) is designed to protect you when that happens, covering legal defence costs and compensation subject to the policy terms.
What Does Professional Indemnity Cover?
PI insurance covers claims alleging a breach of professional duty, such as negligence, errors or omissions in the services or advice you provide. Depending on the policy, cover can extend to:
- Legal defence costs, even if the claim is without merit
- Compensation and settlements
- Unintentional breach of confidentiality or intellectual property
- Defamation
- Loss of documents
Who Needs Professional Indemnity Insurance?
Some professionals are legally required to hold PI insurance as a condition of their licence or membership. Others hold it because clients demand it in contracts, or because a single claim could otherwise threaten their business. Common examples include:
- Accountants, bookkeepers and financial professionals
- Architects, engineers, draftspeople and building designers
- IT consultants, software developers and digital agencies
- Management consultants and business advisers
- Real estate agents and property managers
- Health and allied health practitioners
- Marketing, design and media professionals
Claims-Made: Why Timing Matters
PI policies are usually written on a “claims-made” basis. That means the policy that responds is the one in force when the claim is made against you and notified to the insurer, not when the work was done. This has important consequences:
- Letting your cover lapse can leave you exposed to claims about past work.
- Retroactive dates matter. Check that your policy covers work done before the current period.
- If you retire or close your business, you may need run-off cover to stay protected against future claims about past work.
- You should notify your insurer promptly about any circumstance that might lead to a claim.
How Much Cover Do You Need?
Consider the size of your projects, the potential financial loss a mistake could cause, contractual requirements and any industry body minimums. Limits commonly range from $1 million to $20 million.
PI vs Public Liability
Public liability covers physical injury and property damage. Professional indemnity covers financial loss caused by your advice or services. Many professional businesses need both.
Get Advice From a Broker
PI wordings differ significantly between insurers. Gidda Insurance Brokers helps professionals compare cover, understand retroactive dates and avoid gaps. Visit our services page or contact us on 0491 999 555.
This article contains general information only and does not take into account your objectives, financial situation or needs. Before making a decision, consider whether the cover is appropriate for you and read the relevant Product Disclosure Statement (PDS) and Target Market Determination (TMD). Gidda Insurance Brokers Pty Ltd is an Authorised Representative (No. 001307383) of Regis Licensing Pty Ltd ABN 71 130 820 727, AFSL 338156.
