Professional indemnity insurance is a must for people in business – selling either their skills or knowledge. Also known as PI insurance, it protects a business against claims made by a third party or client, for damage or loss. This might happen if the business owner was found to be negligent in some (or all) of the services the business provided, or if the individual made mistakes in their work.
Top Five Professional Indemnity Insurance Facts
Professional Indemnity Insurance Is A Legal Requirement For Many Businesses
In fact, professional indemnity insurance is a legal prerequisite for many professions, to carry out their business legally. This includes accountants, solicitors, mortgage intermediaries, brokers, financial advisers and insurance advisers.
Increasingly, many consultants and agencies are choosing to take out professional indemnity insurance to protect their business, along with designers. This can include those in the contingent workforce, as well as those who are responsible for paying self employment tax.
Customers And Premises Both Need Cover
Another valuable type of business cover is public liability insurance, which covers the legal costs and any resulting damages from cases arising from death, injury or damage to property, on your business activity premises.
Public liability insurance is essential if you have customers on your premises, for example if you run a shop. Again, public liability insurance is a legal requirement for some businesses, including sports centers and riding stables.
Employees Must Be Covered As Well
Employers liability insurance works in a similar way, but helping businesses meet costs for legal fees and damages for employees who are hurt or made ill at work, when the employer is at fault. One fact many people don’t realize, is that employees can still claim for compensation if the business has gone into receivership or liquidation. This makes employers liability insurance compulsory, for at least £5 million of cover, although many insurance providers will offer employers liability insurance automatically for £10 million or more.
There are cases for exemption – if the business isn’t limited, if you just employ close family or are the only employee – the insurance is no longer legal.
You’ll Need To Show Risk Management
Before an insurance company will grant coverage, they will expect to see that the business has processes and guidelines in place to reduce the risk of a claim. Your insurance adviser can give advice on what these processes should look like and there are specialists who can help you present your risk correctly.
Good project documentation is an ideal way to manage risk of claims. Set out terms in contracts with clients, keep a comprehensive incident ledger and deal with any complaints fully as they arise, according to a policy.
Your Business Must Be Properly Covered
With all professional indemnity insurance, cover is granted on a claims made basis. So this means the policy will only cover those claims made whilst it’s live. This means that you should continue with a ‘run off’ cover after you plan to retire or close your business, in case any claims relating to the business operation are made by customers or employees at a later date.
Similarly, if you are looking to change your insurance provider, you’ll need to get agreement from the new provider that they’ll accept any claims from prior incidents, or arrange run off cover.
Remember too, that this is a specialist area of insurance and as such it may be valuable to go through a specialist advisor who can help you ascertain the correct requirements for your business and organize appropriate cover amounts.
In the field of insurance, there is no saving to be made from cutting corners – the legal and financial implications of inadequate insurance are too grave. Speak to an advisor with demonstrable qualifications in the field, ideally registered with professional bodies in the field and recommended.
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