Professional Indemnity Insurance, Protect your business from potential claims of negligence

Is professional indemnity insurance compulsory?

Possibly, depending on your profession. In the insurance sector for example, all insurance brokers have to hold professional indemnity insurance to be authorised by the Financial Conduct Authority, and brokers cannot trade without that organisation’s permission.

Likewise, the Royal Institute of Chartered Surveyors (RICS) insists all members hold an adequate level of professional indemnity insurance. Certain accountancy bodies, such as The Institute of Chartered Accountants in England & Wales (ICAEW) also insist on it.

On the other hand, if you are a business consultant, no, PII is not compulsory. However, it is highly recommended, because if your client alleges you provided bad advice that has cost them money, then they may sue you. At Prizm Solutions, we’ve seen this happen many times.

For example, if an accountant fails to correctly advise a client who ends up paying too much tax, the client may choose to sue them. If a graphic designer uses copyrighted images without getting the appropriate consent and the client gets sued, they may sue them. Should a civil engineer accidentally lean on his keyboard whilst designing a housing estate, causing the whole estate to be built incorrectly at an angle, he might get sued.

In our years of experience dealing with insurance, we’ve also seen that sometimes, sadly, companies may also sue you as a way of getting out of paying your invoice by alleging that your work was defective.

How much does professional indemnity cost?

The cost of professional indemnity insurance varies depending on what business you run, the size of your business and your claims history.

We have some clients paying £100 per annum and others paying £100,000 per annum. It’s all linked to what you do, the size of your business and your claims history.

How much cover should I buy?

The prudent answer is as much as you can afford.

Our minimum level of cover is as little as £100,000 but most business buy one, two or five million pounds worth of cover. Maybe think of the worst case scenario, then double it!

Why is it so expensive?

The premium is linked to what you do and the potential size of claim if you get it wrong.

Imagine an insurance broker being told to insure Windsor Castle and he forgets, and the next day it burns down. His Professional Indemnity insurance policy will have to pay for the cost of the repairs.

I have questions about professional indemnity insurance, who can I ask?

Please feel free to contact us on 01827 313931 or email us hello@prizmsolutions.co.uk.

One of our team will talk to you about your current circumstances in order to advise the best way forward. If you’d prefer to visit us at our offices in Tamworth, feel free to pop in! Just check our office hours on Google to make sure we’re open.

Which insurance companies does Prizm Solutions deal with for professional indemnity insurance?

The list is constantly changing as insurers enter and exit the market, but a present we primarily use

Aviva, AXA, RSA, Lloyds Underwriters, Zurich, QBE, Allianz, Angel (AXA XL), Beazleys, Travelers, AIG, CFC Underwriting, Markel, Chubb, HCC, Folgate, Hiscox, NIG, Burns and Wilcox, NBS and Aqueous.

Questions we frequently get asked about professional indemnity insurance.

Is Professional Indemnity the same as Public Liability?

No. In most cases Professional Indemnity is there solely to cover financial losses, whereas Public Liability covers injury and property damage.

So is Professional Indemnity the same as Directors Liability?

No. Directors Liability is there to cover the directors personally, whereas a Professional Indemnity policy will cover the company for the mistakes (or alleged mistakes) made by company staff.

Is professional Indemnity tax deductible?

Yes it is, like any other business expense. It is not subject to VAT though, but is instead subject to IPT (Insurance Premium Tax) which cannot be recovered.

Does the policy only cover named people?

No. The policy covers the policyholder and everyone who works for them, as long as you’ve told your insurers what they all do.

Can you backdate professional indemnity insurance?

Some policies can come with a retroactive clause which can cover you for any activities over the past, say 5 years , but not all – so always check.

What happens if we need to make a claim?

If you need to make a claim on your insurance, you need to call your insurance broker or insurance company straight away.

If you have a policy with Prizm Solutions, then you simply call us.

As your broker, we are here to help – and we will provide you with all the contact numbers you need to deal with a claim when you take out the policy.

We're here to help!

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