Do I need professional liability insurance?
Many professions are required to carry professional indemnity insurance as part of the regulatory requirements of their respective industry bodies. Even if you’re not required to have PI insurance, without it, you could be liable for thousands of pounds in legal fees and compensation payments, not to mention lost income from time spent defending any accusation. You may need professional indemnity insurance if:
- provides professional advice or services to your clients (including consulting or contracting)
- provides designs to your clients (such as working as an architect or design engineer)
- you want to protect yourself against allegations of error or negligence in the work you have done for your client
- you work as a contractor, consultant, freelancer or self-employed professional, and your client has asked you to take out professional contract insurance of indemnity to enter into a contract
- Your industry association/regulatory body requires you to have it
professions that may need professional indemnity insurance include (but are not limited to):
- business and management consultants, such as marketing consultants, training consultants, and educational consultants
- it professionals, including it contractors, consultants, programmers, and developers
- engineering and technical contractors, including cad designers, project engineers, and offshore oil and gas engineers
- recruitment agencies and recruitment consultants
- designers such as web designers, graphic designers and interior designers
- fitness professionals including personal trainers, dance teachers and yoga instructors
- teachers and tutors, including private tutors
what does professional liability insurance not cover?
While pi insurance covers quite a few circumstances, there are also some scenarios where you may not be covered.
You should refer to the terms and conditions of your policy for full details, but in general pi insurance does not cover:
- fines and penalties
- any loss to your business caused by mold, pollution, or asbestos
- injury to an employee
- injury or loss to a joint venture (only your products/services would be covered by your insurance, and not a partner’s products or services)
- circumstances that existed before your coverage began.
what is an example of a pi insurance claim?
A graphic designer was instructed by his client to provide price tags to fit around the stem of Christmas trees. the tags would have to withstand exposure to the elements and remain tight to the tree as it grew. the labels did not survive the test of time; the ink ran, rendering them useless to the customer. The client lost money because of this oversight and took legal action against the graphic designer for professional negligence. The graphic designer’s professional liability insurance policy covered legal costs and client compensation payments, a total cost of over £3,000. the customer did not pursue his claim for the full cost of the labels; if they had, the claim could have cost up to £100,000.
how much does professional liability insurance cost?
cost varies depending on a number of factors, including the amount of cover, but markel direct offers pi insurance cover from £8 per month (or £78 per year) for a wide range of professionals. Still confused by professional indemnity insurance? Call us on 0800 640 6600. We are professional compensation experts and will be happy to help you with any questions you may have.
how to claim professional liability insurance
Knowing how and when to file a professional indemnity insurance claim can be tricky. Generally, you must notify your insurer when a customer files a complaint that cannot be easily rectified or remedied. in some cases, what is needed is a refund or changes in service. however, if the customer is still not satisfied, your coverage may be able to respond.
To file a claim, you must first contact your broker or insurer directly. if you need guidance, they will be the best point of contact and can give you advice on how to resolve the issue informally, or they can tell you about your next steps. You should also re-read your policy document to make sure you’re covered.
From here, you can fill out a claim form that gives your insurer all the information they need to start your claim. they may require proof or evidence, such as emails between you and the customer, to show what the problem is and why you are claiming your pi insurance.
once you complete the form, your insurance provider will keep you updated every step of the way, informing you of updates and information about your claim.
professional indemnity insurance jargon
If you’re confused about the terminology associated with professional indemnity insurance, we explain some of the jargon below.
what is the difference between an ‘any claim’ policy and an ‘add-on’ policy?
‘any claim’ and ‘aggregate’ refer to the basis of coverage of a professional indemnity policy.
an ‘any claims’ policy provides coverage up to the full limit for each individual claim made in the insurance period, while an ‘aggregate’ policy provides coverage up to the full limit for all claims made in the insurance period .
To put this into context, if two claims of £75,000 are made against a £100,000 professional indemnity policy, the insurer would cover the costs of both claims as they are both under the £100,000 limit.
If two £75,000 claims are made against a £100,000 aggregate professional indemnity policy, the insurer would only pay up to the £100,000 limit. as the claims amount to £150,000, the remaining £50,000 would have to be covered by other means.
Although any claim is generally considered the most comprehensive option, the basis of coverage varies from insurer to insurer depending on their business.
what does ‘claims made’ mean?
A ‘claims made’ policy provides cover for claims that are made and reported to the insurer during the period of insurance.
This means that as long as the wrongful act occurs during the insurance period and you report it to the insurer during the insurance period, you will be covered. however, if the policy is canceled or not renewed, the coverage will end and any subsequent claims, regardless of when the wrongful act occurred, will not be covered by that policy. As such, it’s important to have professional liability insurance coverage, even between contracts or jobs, to ensure your business is protected. all markel direct professional liability insurance policies are based on “claims made”.
This is in contrast to a “casualty” policy which provides coverage for claims that occur during the period of insurance. professional indemnity policies are rarely, if ever, written on this basis. most commonly found with public liability and employer liability policies.
what is ‘run off’ coverage?
execution coverage insures against professional malpractice claims brought against you after your business has ceased operations. this could be, for example, if you have sold your business or closed it. It’s particularly important for retired business owners to consider; Without escape coverage in place, they would have to finance the defense of the claim out of their own back pocket.