Professional indemnity insurance, also known as Professional Liability insurance or Errors & Omissions (E&O) insurance, protects you in the event that a client claims that your company or an employee of your company has been negligent or made a mistake that resulted in a financial loss. This type of insurance is usually taken by businesses that provide professional services or provide intellectual advice but actually, all businesses should consider this cover, especially in the UAE.
What does Private Indemnity Insurance Cover?
Put simply, professional indemnity insurance covers the Business (rather than the Director’s & Officers) against the cost of mistakes (or alleged mistakes) that are made when providing professional services. Regardless of how professional or diligent employees are, in today’s busy world, anyone is at risk of making a mistake. Some mistakes are minor with little or no financial loss or consequence, however, others can be far more serious. If a business does not have adequate professional indemnity insurance cover, this mistake can be financially devastating to a company, its directors or partners, and all of its employees.
Depending on the specific policy purchased, professional indemnity coverage will include negligence, errors and omissions, breach of duty and civil liability. Professional indemnity insurance should also cover the liabilities which are the result of negligence, such as potentially very significant legal costs and/or any damages or settlements incurred from being sued. There are also some additional covers some professions take such as replacement costs of lost/damaged documents and protection against liability caused by subcontractors or consultants you engage with.
Some policies also include additional protection such as the business or financial loss caused by defamation, lost paperwork, dishonest conduct of employees and unintentional breach of confidence. The policy may also cover potential infringement of intellectual property rights or copyright, which is particularly important in creative industries.
Ideally you should ensure to have full retroactive cover in place also. In case of any past wrongful acts or errors that were made and not yet discovered. So coverage should also include a retroactive cover from when your business was first incorporated.
Who needs Professional Indemnity Insurance?
If you ask an insurer they will tell you that all Businesses should have it, so all businesses really should consider some coverage. In reality certain industries carry significantly more risk than others. As part of their respective industry body’s regulatory requirements, many professions need to have professional indemnity insurance. Even if you don’t legally have to have Professional Indemnity insurance, without it, you could be liable for significant legal fees and compensation, in addition to the lost income from the time spent on the case.
General liability insurance policies will not cover claims for professionals with expertise in a specific area arising from business or professional practices such as negligence, misrepresentation or malpractice.
The following checklist below, means you are most likely to need professional indemnity insurance:
- You provide clients with advice and or professional services (including contracting and consulting)
- You provide clients with designs (eg as an architect or design engineer)
- You want to protect against negligence or allegations of mistakes in work undertaken for clients
- Your client has requested you have professional indemnity insurance in order to complete a job and you work as a freelancer, consultant, contractor, consultant, or self-employed professional.
- You are required to have it by the industry association or regulatory body you work under.
Which type of businesses need professional indemnity cover?
- Lawyers, Doctors and medical professionals
- Accountants and finance professionals
- Architects, engineers, surveyors, facility management companies, construction companies,
- IT, computing and software consultancy companies
- Beauty and health companies
- Employment and specialist consulting agencies
- Real estate agents, auctioneers and many more
How much does professional indemnity insurance cost?
There are many factors that go into the cost of the policy, not just the amount of cover needed or the limit of indemnity required. The premium calculation varies by profession, as some are much higher risk than others and this type of risk also needs to be referred to in the reinsurance market. So a quick off-the-shelf solution is often not possible. Insurers need a lot of information about the business, and the risk they are underwriting. The size of a business, the annual turnover, financial statements, and the nature of the business’s trading activities are all a crucial part of any premium calculation that is made. The greater the exposure to a potential claim, the more the premium is likely to be. If there have been any claims previously, this will also impact the premium offered.
Make sure you speak with a qualified professional who can help you choose the right cover, at the right price.
To get a complimentary quote on your professional indemnity policy or to find out more, visit https://www.beneple.com/professional-indemnity/.