What is Professional Indemnity Insurance?
Professional Indemnity Insurance, also known as PI Insurance or Professional Liability, is designed to cover those in service or advice based industries. This could be accountants, consultants, IT consultants or design based roles and so on. There are far too many to list but if you fall into a category that provides any advice or professional services you need Professional Indemnity Insurance.
So how does it work? If a client decides the service or advice you provided was wrong or in some way negligent they could sue for any financial loss suffered. Professional Indemnity covers the cost of defending claims along any compensation awarded to your clients. This could include claims for any copyright or IP infringements.
It’s important to note that Professional Indemnity policies operate differently to nearly all other insurance policies. The policy operates on what’s called a “claims made” basis. This means there must be a policy in place at the time the claim is made and not at the time the loss occurred.
What does “claims made” basis mean?
You’re about to sign a new contract with a client but they insist on you having Professional Indemnity insurance. You buy the policy for the contract that is due to last 11 months. When the contract is completed you don’t renew your policy. 6 months later your client advises you your work was poor which resulted in lost sales costing them thousands. They advise you to notify your insurers. As you have let your policy lapse though there is now no cover in place.
It is important that you continually renew your PI policy year in year out to ensure that you are properly covered in the event of a claim for past work completed. Even in the event you have closed the business it is important to consider run off cover for a period of time after you cease trading in the event of a claim.
There is no one size fits all when it comes to PI Insurance. Policies are tailored to individual industries providing different levels of cover. The Team at Sound Insurance are specialists in Professional Indemnity Insurance. Call us today on 01 524 2800 or visit sound.ie to find out more