Professional Indemnity Insurance at a glance

What is professional indemnity insurance?

Anyone can make a mistake – but if your business is found liable for negligence, the costs can be financially devastating. Not only can it lead to an expensive lawsuit, but your business’ hard-earned reputation may be damaged as a result.
That’s why professional indemnity insurance matters – for help protecting your assets and brand if your advice causes a client to take legal action against you.

Who should consider it?

Professional indemnity insurance is mandatory in some industries, such as medicine, accounting, law and financial advisers – with the requirements differing from state to state.
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.

What can it cover?

As a wide-ranging insurance solution, professional indemnity cover may include anything from accidents to errors and omissions. Depending on your policy, professional indemnity insurance can cover:

Type of coverPotential benefits
Civil LiabilityCivil liability to a third party arising out of the conduct of their professional business.
Inquiry costsThe cost of defending an inquiry by a regulatory body into the professional conduct of the insured.
Defence costsThe costs involved in defending a claim triggered by the policy.
Fidelity coverDirect financial loss of the business caused by the dishonest or fraudulent conduct of an employee which is first discovered during the period of insurance.
Advancement of costs and expensesAdditional costs and expenses incurred during a claim.
What usually isn’t covered?

Exclusions, the excess you need to pay and limits of liability can vary greatly depending on your insurer. Policies generally won’t include cover for:
• Contractual or commercial liabilities
• Liabilities which results from fraud and dishonesty
• Pollution
• Unpaid fees

Case Study

Michael is an engineer who designs the supporting foundations of a residential property. He makes an error with the site calculations – which
leads to the slab cracking and damage to the property of the owner. His company is liable for this loss, which could be anywhere between $150,000 up to the full value of the house.
But because Michael has professional indemnity insurance, he’s covered for this amount – as well as any legal expenses if the matter goes to court.

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Important Notice

This article provides information rather than financial product or other advice. The content of this article, including any information contained in it, has been prepared without taking into account your objectives, financial situation or needs. You should consider the appropriateness of the information, taking these matters into account, before you act on any information. In particular, you should review the product disclosure statement for any product that the information relates to it before acquiring the product. Deductibles, exclusions and limits apply. This type of insurance is issued by various insurers and can differ.

Information is current as at the date the article is written as specified within it but is subject to change. CRM Brokers make no representation as to the accuracy or completeness of the information. Various third parties have contributed to the production of this content. All information is subject to copyright and may not be reproduced without the prior written consent of CRM Brokers.