Professional indemnity insurance is slightly different to professional liability it applies specifically to cover for an error or negligence in the professional business services if a business offers its clients and third parties any knowledge or skills. If something goes wrong and an accusation is made against a business it is a serious matter and cannot be ignored. Insurance helps cover the cost of defense or of compensation if admitting the mistake. This is obviously a very expensive mistake to make but at least with insurance it would not cost you your business if such an incident did occur as legal costs would be compensated.
Who needs Professional indemnity insurance?
If you are a company that claims to offer expert or professional services to customers in the UK then you are potentially at risk. Further still some businesses need by law to have purchased professional indemnity insurance cover or even a business benefiting from professional services might also need it. For example if you are an accountant or solicitor or financial advisor you are required to have it. Other businesses that it would be beneficial for is PR or advertising companies. If a duty of care is set up for clients or third parties whether free or a paid facility then if this is violated or a loss occurs a claim can be made against the company. The insurance is to cover the professional not the customer.
What to watch out for when buying
There are limits to indemnity insurance. There is a maximum amount that insurers will pay out. Although there are different limits to separate amounts there is an overall limit that an insurance company will have even if it is from several claims. Therefore although this insurance is a good way of covering your business it should be avoided if possible, good documentation and solid contracts with customers will help this. After a business has been closed a claim can still be made if it was as a result of your services so make sure you do not cancel your cover or arrange it so that you still would be covered in the event of someone doing so. Similarly, if you change insurance companies than you need to make sure that they agree to take on claims that happened before they were your chosen insurers. This is a more specialized area of insurance so before purchasing, research and discussion with UK professionals is recommended to ensure you get the right coverage for your company or small business.