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What is Professional Indemnity Insurance?

There’s no doubt you have the confidence and expertise required to work in your professional field, however if you give advice or provide a service it’s important to protect your business against claims of malpractice or professional misconduct. After all, you’re only human and making mistakes is part of life. It only takes one allegation that you’ve made a mistake, overlooked a critical piece of information, misstated a fact, or failed to provide a promised service resulting in financial loss or injury to your client to turn your business upside down. But while you can’t control an unhappy client you can have some control over how a claim made against you is managed.

Professional Indemnity insurance is designed to protect businesses and individuals against the financial consequences of any errors you or your staff might make. It covers compensation costs to your client/complainant, as well as legal and defence costs. Even if you haven’t done anything wrong an unsubstantiated allegation could still cost thousands of dollars to defend, so unless you’ve got a law degree up your sleeve you’re going to need some expert help. Having a Professional Indemnity policy will not only give you access to the funds you need to defend yourself; it will help protect your reputation too.

What Does Professional Indemnity Insurance Cover?

Professional Indemnity Insurance covers you for the legal costs and claims for damages that may arise from an act, omission or breach of duty in the course of your business, as well as investigation costs from professional bodies.

A Professional Indemnity claim could result from:

  • Third party damage claims for personal injury or property damage caused as a result of your business activities
  • Legal costs and expenses incurred from defending yourself and your business
  • Investigation costs to investigate claims
  • Medical costs and compensation payments arising from a claim. These can run into hundreds of thousands of dollars, depending on the severity of the injury or property damages
  • Damage or loss of third party property in your custody, care or control

Some examples where Professional Indemnity Insurance could apply are:

  • An advertising agency who fails to follow instructions from their client and advertises the client’s product with misleading information
  • A personal trainer who provides a training program to a client that does not match the client’s physical level resulting in injury
  • A real estate agent who falsely advertises the specifications of a property resulting in a sale that otherwise wouldn’t have happened
  • An accountant who incorrectly advises a client that an expense is tax deductible only for the client to receive a fine from the ATO
  • A migration agent who provided misleading information regarding a visa application and was subsequently investigated by the Migration Agents Registration Authority

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Choosing the right policy

When considering Professional Indemnity Insurance it’s important to consider the risks your business is exposed to as each industry is unique. That’s why most Professional Indemnity policies are often tailored to meet the industry-specific needs of key professionals and consultants.

We offer policies from some of Australia’s leading insurers with cover limits from $500K to $20M.

Consider the following when choosing the right policy:

  • What are the potential risks your business could be exposed to and what is the potential cost to rectify any errors? In other words, if the worst was to happen, how much do you want your insurer to pay?
  • If action was taken against you what could the costs of legal and investigation costs be?
  • Are there any statutory requirements for your profession?
  • Do you belong to an industry association or governing body that specifies a certain level of cover be held?
  • Do any of your contracts require a minimum level of cover?
  • Do you require any endorsements (amendments to the standard wording)?
  • Is Run-off cover included or available as an option if you cease operating?

What is the difference between Professional Indemnity and Public Liability insurance?

It’s important to understand the difference between Professional Indemnity and Public Liability insurance as the two types of cover can often cause confusion. Whilst both covers protect your business against legal action they both offer different forms of protection.

Professional Indemnity insurance covers you for claims that arise from an act, omission or breach of duty as a result of the professional advice, design or service that you offer. Professionals that work in health, fitness or beauty; real estate; IT; financial or legal services; and design or consultancy services always require Professional Indemnity insurance.

Public Liability insurance covers against claims made against you should a customer, supplier, or member of the public suffer bodily injury or property damage as a result of your business activities and which do not involve a breach of professional duty,. For example, if someone trips over a box that you’ve left in a walkway, or you damage your client’s laptop by spilling coffee over it. Whether you work in a professional field or not, all businesses have a ‘general’ duty of care and therefore need Public Liability cover.

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