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What is Professional Indemnity Insurance?*

There’s no doubt that 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 consider your options to protect your business against claims of malpractice or professional misconduct.

After all, you’re only human and making mistakes is a 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 (PI) insurance is an important form of protection for businesses that provide specialist services or professional advice.  It is designed to respond to claims against your business for losses as a result of actual or alleged negligent acts or omissions in the provision of your professional service or advice. Professional Indemnity insurance will also assist with the legal costs associated with responding to or managing claims which are covered by the policy.

What Does Professional Indemnity Insurance Cover?

Depending on the Professional Indemnity policy selected, your policy could cover:

  • Payment of compensation as a result of a claim, including but not limited to Court awarded damages
  • An award of legal costs against you
  • Reasonable legal costs incurred in defending or responding to the claim
  • Claim investigation costs
  • Disciplinary proceeding costs

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 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 is 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 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 selecting your 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 insurance and Public Liability insurance as the two types of cover can often cause confusion. Whilst both covers protect your business against legal action, they offer different forms of protection.

Professional Indemnity protects you against losses claimed by a third party due to alleged or actual negligence in your professional services or advice.  Your Professional Indemnity insurance will meet the associated compensation payable to a third party together with your defence costs (which can include legal costs, investigator costs and expert fees). Professionals, including those that work in health, fitness or beauty; real estate; IT; financial or legal services;  design or consultancy services or are part of industry associations, usually require Professional Indemnity insurance.

Public Liability insurance* is designed to provide protection for you and your business in the event a customer, supplier or a member of the public are injured or sustain property damage as a result of your negligent business activities.   For example, someone could trip over a box that you’ve left in a walkway, or you could damage your client’s laptop by spilling coffee over it during a meeting. Whether you work in a professional field or not, all businesses have a ‘general’ duty of care and so Public Liability cover might also be something to consider.

*As with any insurance, cover is subject to the terms, conditions and exclusions contained in your policy document.  The information contained on this webpage is general only and should not be relied upon as advice.

Professional Indemnity Insurance is a business name of BizCover Pty Ltd (ABN 68 127 707 975; AFSL 501769)