There are many types of insurance that businesses may require, but one of the most important is often professional indemnity insurance. But what is this, and why is it so important? Here is an overview of this type of policy to provide you with more information should you decide to take out a policy for your business.
What is it?
If you are running a business, it’s a fact of life that things can and do go wrong. Mistakes happen, whether they were caused completely innocently or through an employee failing to follow procedures, and in some cases this can have serious repercussions.
You can often be liable for mistakes that you make, whether you provide bad advice or provide a service that does not meet the client’s expectations. In such situations you may have to pay a large amount of money to rectify the problem.
Professional indemnity insurance, which is also known as PI insurance, provides your business with financial protection for any claims made against it rising through a mistake that you may have made.
Who Needs it?
Some types of businesses are more prone to making mistakes that can be serious and costly. However, many businesses could take advantage of PI insurance. For example, if your business provides professional advice or a service, if you are involved in using copyrighted material, or if you handle confidential information, there is a good chance that you could benefit from having such an insurance policy in place.
In some industries, clients may only hire you if you have PI insurance, so it can be seen as a necessary expense. For some professionals, it may even be compulsory.
When it comes to professional indemnity insurance cost, although it is another expense to consider, the cost of cover will often be significantly less than any large claims for compensation that are made against you.
What does it Cover?
PI insurance typically covers the expenses you may incur for your legal defence, solicitors and counsel. However, the financial cover is only one factor of this insurance. For example, many insurance companies also provide support for customers who think that they may have to defend a claim.
Some insurance policies also provide cover for work that you have done previously. So, even when your business stops trading, you can keep on paying for cover to ensure that you are still covered or anything that you are liable for. In this situation, the risk tends to go down over the years, so the premium also goes down accordingly.
It’s important to remember that even if you are completely innocent of any wrongdoing, a claim for compensation could still be made against you. If you have to pay to defend yourself in court, things could get very expensive. PI insurance may cover your court costs even if you are innocent, providing you with extra peace of mind.
Find the Right Policy for your Business
These are some of the main factors to know about when it comes to looking for professional indemnity insurance. Take some time to research this type of insurance more and to find out about your own specific needs. When you are comfortable with everything, find a policy that is suitable for your business so that you can enjoy the peace of mind that comes with knowing you are financially protected come what may.