Professional Indemnity Insurance Guide for UK Professionals

What is professional indemnity insurance?

Professional indemnity insurance, sometimes called PI insurance, covers businesses and individuals against claims made by clients who believe they have suffered financial loss as a result of advice, a service, or a piece of work provided to them. This could include allegations of negligence, errors, omissions, or breach of professional duty.

Unlike public liability insurance, which deals with physical injury or property damage, professional indemnity insurance is concerned with financial loss arising from the quality or accuracy of professional services. It typically covers legal defence costs as well as any compensation awarded, up to the policy's limit of indemnity.

Who needs it?

Professional indemnity insurance is commonly used by consultants, IT contractors, marketing professionals, surveyors, accountants, architects, and anyone else providing advice, designs, or professional services to clients. Certain regulated professions, such as solicitors and some financial advisers, are required by their professional or regulatory bodies to hold a minimum level of this cover.

Even where it isn't a strict requirement, many clients, particularly larger organisations or those in the public sector, require contractors and consultants to hold professional indemnity insurance before awarding a contract. Freelancers and sole traders offering professional services are also frequent users of this cover, given that a single dispute over advice or work could otherwise be financially significant.

What's covered and what's excluded

A professional indemnity policy typically covers claims relating to negligent advice, mistakes in professional work, breach of confidentiality, loss of client documents, and defamation arising in the course of providing services. It generally covers both the cost of defending a claim, even if ultimately unsuccessful, and any damages awarded against the policyholder.

Exclusions commonly include deliberate or dishonest acts, claims arising from work carried out outside the professional's area of expertise if not declared to the insurer, and sometimes claims relating to specific excluded activities depending on the profession. It's also worth understanding that most professional indemnity policies are 'claims-made', meaning cover generally needs to be in place both when the work was carried out and when a claim is eventually made.

• Negligent advice or professional mistakes
• Breach of confidentiality or loss of client data/documents
• Legal defence costs, even for unsuccessful claims
• Deliberate or dishonest acts are excluded
• Policies are usually 'claims-made', affecting when cover needs to be active

What affects the price

Premiums for professional indemnity insurance depend on the type of profession or service provided, the level of indemnity chosen, annual turnover or fee income, the business's claims history, and sometimes qualifications or experience. Professions seen as carrying higher risk of costly claims, such as those involving significant financial advice or technical design, may see this reflected in the price.

The limit of indemnity selected, and whether this is required by a regulatory body, trade association, or client contract, also plays a role. Businesses with a track record of claims, or those offering a wider range of services with greater potential for disputes, may generally face different pricing considerations than those with a narrower, more established service offering.

Tips for choosing cover

Check whether your profession or regulatory body specifies a minimum level of professional indemnity cover, and whether any clients you work with have their own contractual requirements. Keep clear records of the advice and work you provide, as good documentation can be valuable if a dispute ever arises.

Because professional indemnity policies are generally claims-made, think carefully before cancelling or lapsing cover, since a claim relating to past work could still arise after you stop providing services, and run-off cover may be worth considering in that situation. Comparing how different specialist brokers assess risk for your profession can also help you find a suitably matched policy.

How to get a quote

If you provide professional advice or services and want to look into professional indemnity cover, you can complete a short form with details about your work, and a specialist broker will get in touch to discuss suitable options, with no obligation to proceed.

Frequently asked questions

Is professional indemnity insurance a legal requirement?

It isn't a general legal requirement, but certain regulated professions and many client contracts require a minimum level of cover to be in place.

What does 'claims-made' mean?

It means cover generally needs to be active at the time a claim is made, not just when the work took place, which is why many professionals consider run-off cover if they stop trading.

Does professional indemnity cover physical injury claims?

No, claims involving physical injury or property damage are generally covered by public liability insurance rather than professional indemnity.

Who typically needs professional indemnity insurance?

Consultants, IT contractors, designers, accountants, surveyors, and other professionals providing advice or services to clients commonly consider this cover.

What affects the cost of professional indemnity insurance?

Profession type, limit of indemnity, turnover, and claims history are among the main factors that influence the premium.