Question 1

What is professional indemnity insurance?

Accepted Answer

Professional indemnity insurance — commonly shortened to PI insurance — responds when a client alleges that your professional advice, design, or service was negligent, contained an error, or omitted something, and that they suffered a financial loss as a result. It typically covers the legal costs of defending the allegation and any damages awarded or settlement agreed, up to the policy limit and subject to the policy terms.

Question 2

Is "personal indemnity insurance" the same thing?

Accepted Answer

There is no standard UK commercial insurance product sold under the name personal indemnity insurance. It is one of the most common ways people mis-remember the name, and in almost every case professional indemnity insurance is the cover being looked for. Two different products are occasionally meant instead: directors' and officers' insurance, which protects directors personally for management decisions rather than for professional services delivered to a client; and personal accident insurance, which pays a benefit following injury. If a client or a contract has asked you for "personal indemnity insurance", it is worth checking the wording before you buy anything.

Question 3

What is the difference between professional indemnity and public liability insurance?

Accepted Answer

Professional indemnity responds to financial loss caused by your work — your advice, your design, your report. Public liability responds to bodily injury or physical damage to third-party property caused by your business activities. A consultant whose report contains an error that costs a client money is a PI claim; a consultant whose equipment trips a visitor at a client office is a public liability claim. The two respond to different events and many professional firms hold both.

Question 4

Who typically needs professional indemnity insurance?

Accepted Answer

Any business paid for its expertise, advice, designs, or specialist services. That typically includes consultants, accountants, architects, surveyors, engineers, IT contractors and developers, marketing and design agencies, recruiters, project managers, and trainers. It is worth considering wherever a client could act on your work and suffer a financial loss if it turns out to be wrong.

Question 5

What does "claims-made" mean?

Accepted Answer

Professional indemnity is written on a claims-made basis. The policy that responds is the one in force on the date the claim is made against you, or the date you notify a circumstance that could give rise to one — not the policy that was in force when the work was carried out. This is why continuous cover matters so much in PI, and why it works differently from public liability, which generally responds to the policy in force when the incident happened.

Question 6

Why does the retroactive date matter?

Accepted Answer

The retroactive date is the point before which work is excluded. A policy with a retroactive date of the day it starts typically covers nothing you did previously. Maintaining unbroken cover and carrying the earliest possible retroactive date forward at each renewal is what keeps past work within scope. Allowing cover to lapse and then restarting later will typically reset that date, leaving earlier work outside the policy — one of the most damaging and least understood gaps in PI.

Question 7

What is run-off cover?

Accepted Answer

Run-off cover keeps the ability to notify claims relating to past work after you have stopped trading, retired, sold the business, or ceased offering a particular service. Because PI is claims-made, once the last policy expires there is no live policy to notify a claim to, yet allegations about earlier work can still arrive years afterwards. Run-off is arranged for an agreed period, and some professional bodies and contracts specify a minimum length.

Question 8

Is professional indemnity insurance a legal requirement?

Accepted Answer

It is not a general legal requirement for UK businesses. In practice it is required in two other ways. By contract: many client agreements, framework contracts and public sector tenders specify a minimum PI limit before work can start. And by regulation or membership: a number of professional bodies and regulators require their members to hold PI cover to a set minimum. Requirements differ by profession and change over time, so check the current rules for your own body and read each contract.

Question 9

How much PI cover do I need?

Accepted Answer

Limits typically range from £250,000 to £5 million and above. The appropriate level usually depends on the size of the contracts you work on, the financial consequences if your work were wrong, and any minimum specified by a client or professional body. It is also worth establishing whether defence costs sit within the limit or in addition to it, as this materially changes what is available to meet a claim. We can talk this through with you.

Question 10

Do I really need professional indemnity insurance?

Accepted Answer

If clients pay you for advice, designs, reports or specialist services, and could lose money if that work turned out to be wrong, professional indemnity insurance is usually worth having even where nobody requires it. A negligence allegation has to be defended whether or not it succeeds, and defence costs alone can be significant. You are also likely to need it in practice if a client contract, tender or professional body sets a minimum limit. If your work is purely physical, such as fitting or repairing, public liability is usually the more relevant cover.

Question 11

How much should professional indemnity insurance cost?

Accepted Answer

There is no standard price, because insurers rate each firm on its own facts. The main factors are your profession and the services you provide, your annual fee income, the limit of indemnity you choose, whether defence costs sit inside or on top of that limit, the excess, your claims and circumstances history, how long you have held continuous cover, and the size and type of your contracts. Higher-risk disciplines such as construction design or financial advice are generally rated very differently from lower-risk consultancy. We compare terms from our panel of insurers on a like-for-like basis rather than quoting a typical figure.

Question 12

Who usually pays for professional indemnity insurance?

Accepted Answer

The business or self-employed professional who provides the advice or service arranges and pays for their own professional indemnity insurance. A client does not normally buy it on your behalf, but a client contract, framework agreement or professional body may require you to show evidence of cover at a stated limit before work starts. Contractors working through an agency or umbrella company should check whether that company's policy actually extends to their work, as many do not.

Question 13

What is not covered by professional indemnity insurance?

Accepted Answer

Professional indemnity does not cover injury to people or damage to property, which is public liability; injury or illness to your own employees, which is employers' liability; or the personal liability of directors for management decisions, which is directors' and officers' insurance. Policies also typically exclude deliberate or dishonest acts, claims or circumstances you knew about before cover started, work done before the retroactive date, contractual penalties you agreed beyond your normal legal liability, and fines that cannot be insured at law. Exclusions vary between insurers, so the policy wording is what counts.

Question 14

How long is professional indemnity insurance valid for?

Accepted Answer

Most professional indemnity policies run for 12 months and are renewed each year. Because the cover is claims-made, a policy only responds to claims made or circumstances notified while it is in force, so the protection for past work depends on renewing without a gap and keeping your retroactive date. When you stop trading or retire, run-off cover keeps that protection going for an agreed number of years, and some professional bodies set a minimum run-off period.

Question 15

How do I arrange professional indemnity insurance through Focus?

Accepted Answer

Call us or request a call-back. We will discuss your discipline, the services you provide, your fee income, your claims and cover history, and any contractual or regulatory limits you need to meet, then approach our panel of insurers on your behalf. Cover is subject to insurer acceptance, underwriting, terms, conditions, limits and exclusions.

Professional Indemnity Insurance