Professional Indemnity Insurance
The financial security you need in the face of a conflict claims related to the professional services and advice you provide
What is Professional Indemnity Insurance?
Professional Indemnity insurance is not for you, it’s for your customers. If you make a mistake that cost your customers money or reputation, you know and your customers know, they will be taken care of by your insurance.
What are the benefits of professional indemnity insurance?
Do I need professional indemnity insurance?
Professional indemnity insurance is necessary for businesses of many different types from designers and recruiters to accountants and consultants. It might also be necessary for a self-employed individual such as an accountant or consultant, or by a company that does certain types of work.
A business that can benefit from professional indemnity insurance is one that:
– Provides a professional service
– Gives advice to clients
– Handles client intellectual property or data
How does professional indemnity insurance work?
Oftentimes, professional indemnity insurance is explained with regards to what may go wrong, but what exactly does it cover?
Professional indemnity insurance coverage can provide up to NZ$ 50 million for compensation costs or legal fees. If a customer claims that your business has made a costly mistake or it actually makes a costly mistake then this financial assistance will help you survive and thrive far beyond the legal case.
Professional indemnity insurance also offers customised protection via industry-specific policies. As your business grows, you can count on it to cover indemnity risks along the way.
Professional liability cover helps in a wide variety of scenarios, which include data loss claims, professional negligence claims, along with allegations that you have offered poor business advice.
You can easily find yourself facing legal proceedings if somebody in your organisation does not apply due diligence, offers damaging advice in an email, or leaves sensitive files on a bus.
Professional indemnity insurance also covers tricky areas such as intellectual property and defamation. If a social media intern in your organisation shares a questionable claim regarding a competitor or another organisation claims that your work is too similar to theirs, having a professional indemnity policy in place will cover the costs of a legal defence along with any possible pay outs.
Why should I consider professional indemnity insurance?
It is worth noting that professional indemnity insurance isn’t a requirement under the law, but professionals working in some sectors still need to consider it as one of their core business needs. The reason for this is that some industries are more likely to be involved in service-based disputes compared to others. Clients might actually choose to have this insurance as a contractual requirement or the industry regulator might say that it is essential.
Professional indemnity insurance is generally a priority if:
– You’re a contractor, freelancer, consultant, or offer services on a self-employed basis
– You have access to confidential customer information
– Your work may expose you to professional negligence claims. If you offer training in a sensitive area like first aid, this could be the case
– Your work may lead to disputes over vision, quality, or copyright – for instance, if you are an architect or graphic designer
– Your business offers professional services to clients including consultancy and expert advice.
Surveyors, financial consultants, healthcare professionals, engineers, and accountants are all likely to require professional indemnity insurance because of the requirements set by their respective industry bodies. Similarly, contractors that offer services to a particular industry, such as the energy sector, are likely to require a mandatory cover.
However, it does not mean that other types of business should pass over professional indemnity insurance. Media organisations and journalists may face intellectual property claims while IT consultants may breach contractual rules accidentally while they run software updates. If there’s a possibility of a client taking you to court over such a dispute, it can be a good idea to take out professional indemnity insurance.
Why you need professional indemnity insurance?
Professional indemnity insurance is mandatory in some industries, such as medicine, accounting, law and financial advisers.
But even in cases where it’s not required by law, it’s recommended for anyone who is providing professional services or advice in exchange for a fee – like, graphic designers, IT consultants and more. Regardless of your legal obligation, it’s often a customer requirement that you have this cover in place. Here are some of the client industries we work with.
- Accountants
- Architects
- Construction & engineering firms
- Design professionals
- Healthcare workers
- Insurance brokers
- Independent financial advisors
- Management consultants
- Physicians
- Solicitors
- Surveyors
- you could also find that your contract with a client company requires you to have PI Cover in place.
How to buy professional indemnity insurance?
Tell us about your business – we’ll help you build your professional indemnity insurance quote and explore any other insurance needs.
How much PI Cover do you need?
You’ll need to think about the type of projects you work on, and whether your clients, regulator or professional body ask you to have a minimum level of cover.
You can usually choose between NZ$250.000 and NZ$10 million of professional indemnity insurance.
Your clients may tell you the cover amount they need you to have in place. If they don’t, it’s always worth checking before you take on the work.
Need advice?
All you need to know about professional indemnity insurance
Watch our short video guide to getting professional indemnity cover in place.
Professional Indemnity Insurance FAQ's
Professional indemnity insurance isn’t a legal requirement. But regulators and professional bodies may require your business to have professional indemnity insurance, so you should check whether it’s compulsory. As an example, professions like solicitors, accountants and financial advisors are required to have professional indemnity insurance.
You’ll also be able to add any of the following policies to your overall business insurance:
● Public liability cover: Public liability insurance covers your business for the cost of any compensation claims you might face if someone becomes ill or injured or has their property damaged as a result of the work you do
● Employers’ liability cover: Employers’ liability insurance covers legal costs resulting from an employee becoming ill or injured, or having their property damaged as a result of your business
● Product liability cover: Product liability insurance protects you against the cost of legal fees resulting from someone becoming ill or injured, or having their property damaged by a product you sell – which you may be liable for even if you didn’t manufacture it
● Business interruption cover: Business interruption policies cover you for lost income if the running of your business is interrupted by an insured event such as a fire or flood
● Business buildings cover: Also known as business property insurance, this covers you for the cost of any damage done to your premises resulting from an insured event
Professional indemnity insurance claims can be wide-ranging, but some examples are given below:
Management consultant – a business plan provided to a client doesn’t deliver the expected results. They claim against you for their financial loss.
IT contractor – a website, application or software provided to your client isn’t fit for purpose. They claim against you for the cost of putting the mistake right.
Engineering contractor – some CAD work you undertake for a client contains the wrong measurements and causes long delays to your client’s project. They claim against you for the cost of putting the mistake right.
Fitness professionals – a client injures themselves during a session. They make a claim against you alleging that you failed to properly explain how to perform the exercise.
Photographers – a client alleges that the photographs taken aren’t suitable for use, or a memory card corrupts and you lose all the day’s shots. They claim against you for the cost of re-organising the shoot.
Teacher/tutor – a client doesn’t achieve the necessary grades to pass their exams. They claim against you for the financial losses suffered.
If you’re arranging professional indemnity insurance to meet the requirements of a client contract or regulated industry body, it’s worth checking with them if they expect a minimum level of cover in order for you to start work.
If your client/industry body does not have minimum requirements, give some thought to a worst-case scenario and the likely costs involved in putting your mistake right.
We offer professional indemnity insurance for over 200 professions and have levels of cover ranging from NZ$250,000 to NZ$50m, so you are guaranteed to find the right cover for your business.
Yes. When you purchase professional indemnity insurance with LifeCovered®, a proof of insurance document is emailed to you instantly detailing the cover you hold with us. Many of our customers arrange cover with us in order to meet the insurance requirements of clients, agencies and other parties. This document will help you show that you have the appropriate cover in place to start work.
Professional indemnity insurance is not premise based so it doesn’t matter where you’re working, if you’re offering advice then you need PI.
How much will professional indemnity insurance cost?
The cost of taking out professional indemnity insurance for your business operations will vary depending on several key factors, which include:
– The nature and scope of the advice your business provides
– The size of your business and turnover rate
– The size of your clients’ businesses
– The amount of coverage your business needs
Business Scope and Professional Indemnity Insurance
Typically, you should expect to pay higher premiums, the riskier your business advice is, or the higher the stakes are for the clients receiving the advice.
For instance, legal, investment, business, or medical advice from professionals such as lawyers, financial planners, or commercial accountants, can have a relatively high financial or health risk to the recipients, thus, their professional indemnity insurance will have higher premiums.
In comparison, the advice provided by professionals such as bookkeepers, interior designers, and graphic designers typically has lower financial and health risks to the recipients, thus, their professional indemnity insurance will likely have low premiums.
Business Size and Turnover
When it comes to the cost of professional indemnity insurance, the size of the business does matter.
For instance, a marketing and advertising company with 12 employees will generally require a larger professional indemnity insurance coverage than a sole trader operating in the same industry or an agency with only a few members of staff.
Likewise, businesses providing expert advice to big companies, schools, or governments will generally receive higher professional indemnity premiums than those of businesses providing advice to individuals and smaller organizations.
However, there are a couple of exceptions to this rule. One example is medical advice. Since the stakes are usually high for the recipients, the costs of professional indemnity will be high.
Another example of situations where advice is provided to an individual but the professional indemnity premiums are high involves financial planners. This is due to the fact that the stakes are usually high when dealing with finances and the insurance companies are aware of this.
Professional Indemnity Level of Cover
In general, professional indemnity insurance for small to medium businesses is available in either \$1million, \$2million, \$5million, \$10million, and \$20 million.
- Key factors to consider when determining the level of professional indemnity coverage you need include; the nature of the advice you provide and the business size. These will help you to determine the appropriate amount of cover ($) your business requires.
- The important thing to note here is that the greater the potential damages or losses from the advice your business provides and/or the bigger your client’s business is, the higher the amount insured.
- You need to consider things like, what are the biggest risks that could arise from the advice you provide or fail to provide, and what are the maximum damages that your clients can claim for in case they suffered health or financial losses following your advice. Focus on the upper limits.
- How many employees do you have directly dealing with your clients and providing advice? Are they well-experienced? Is your staff turnover rate high?
- Do you provide crucial advice to big companies, schools, government departments, councils?
- Is your business operating in an advice industry that is high-risk for example medical, financial services, aviation?
Key factors to consider when trying to figure out the appropriate professional indemnity level to cover:
- You need to consider things like, what are the biggest risks that could arise from the advice you provide or fail to provide, and what are the maximum damages that your clients can claim for in case they suffered health or financial losses following your advice. Focus on the upper limits.
- How many employees do you have directly dealing with your clients and providing advice? Are they well-experienced? Is your staff turnover rate high
- Do you provide crucial advice to big companies, schools, government departments, councils?
- Is your business operating in an advice industry that is high-risk for example medical, financial services, aviation?
- Some government departments and councils insist on a minimum coverage limit of $2million.
In case your business operations involve working in the above-mentioned situations, you will require a minimum of $10million or even $20million in public liability cover.
So, how much will professional indemnity insurance cost you?
Regardless of if you are a sole trader consultant or a professional advisory agency, in case you suspect that you are not appropriately covered or are paying excessively high professional indemnity insurance premiums, our professional team at LifeCovered® can be of assistance. You can reach us at 0800259925 or schedule a callback with one of our business advisors for a review of your current cover.
Professional Indemnity Insurance cost consultants and sole traders begin from $700 p.a.
Here are some examples of professional insurance costs:
– P.I cost for sole trader consultants offering low-risk advice: from $350
– P.I cost for an I.T. consultant: from $600
– P.I cost for an environment consultant: from $800
Important Note: Even though cheaper professional indemnity policies can seem more appealing on the surface, it is crucial to ensure that the policy covers you for the activities your business undertakes. This way, the insurance policy, and the business will respond as expected in case a claim ever arises.