Every smart business owner will understand the value of insurance. If you own any business, it’s crucial that you protect your livelihood with the right cover. Whether you’re operating as a sole trader or you have an army of employees, you are responsible for any legal implications arising from your work. And without adequate insurance, your assets are at stake.
If your business offers a professional advisory service, indemnity insurance is necessary to stay protected. While you may be confident in your abilities or have a proven record of accomplishment, it doesn’t safeguard you from legal action being taken out against you. Unsure whether indemnity insurance is right for your business? Here are some essential tips to weigh up:
What is Professional Indemnity Insurance?
Professional Indemnity (PI) insurance is a must for protecting consultants and other professionals. It offers protection against liability for damages, and the legal costs and claims relating to errors, omissions or acts as result of the services you provide.
Why it’s Relevant to Business Owners
This type of insurance is specifically designed for professionals who offer advice or services as part of their business. Whilst it’s not mandatory in all industries, it’s a crucial insurance type every smart business owner should consider. For some industries, PI insurance can be an obvious (and required) choice. Healthcare professionals, lawyers, solicitors and financial advisors should all invest in PI insurance. Other industries can also include accountants, IT providers, architects, surveyors, chiropractors and real estate agents.
Some of these industries will require a minimum level of coverage too. The type of PI cover you take out will be dependent on your line of work and the risks relating to it. For example, all healthcare practitioners in Australia are legally required to take out medical indemnity insurance. This insurance is designed to protect both medical professionals and their patients should anything go wrong whilst providing medical care.
The main benefits of PI insurance to business owners include:
- It provides peace of mind that experienced legal professionals will handle any claims or allegations made against you and your business.
- It helps to reduce the loss of income due to the legal costs incurred by such claims.
- It reduces the possibility of interruption to your business, which may cause reputational damage.
Public Liability vs Indemnity Insurance
Whilst public liability is important, it does not offer protection if there is a financial loss only, or if the cause of loss was a breach of professional duty. Public liability insurance provides protection if a customer, supplier or member of the public sues your business for personal injury, death or property damage.
Indemnity insurance, on the other hand, protects you from financial loss caused by lawsuits filed against you for inaccurate advice, negligence or misrepresentation. It’s imperative to understand the difference between the two and know which coverage is right for your business needs.
What’s Covered vs. What’s Not
While policies can vary between insurers, PI typically covers the following:
- Breach of your duty of care to provide a trustworthy and accurate service.
- Confidentiality breaches.
- Civil liabilities (defamation, copyright infringement and breaches of contract duties).
- Legal and investigating costs associated with defending or settling claims.
Things that aren’t covered by PI insurance include:
- Intentional damage.
- Claims relation to circumstances known prior to taking out the insurance policy.
How do I Secure Indemnity Insurance?
PI insurance is purchased as an individual policy. To ensure you secure the best cover for your industry, speak to a broker. A reputable broker will take the time to gain a sound understanding of your business and the risks involved, to determine the right policy for you.
Policies can be customised to suit specific requirements to cater for different businesses facing different risks. It’s important to double check what each policy does and doesn’t cover, as these can vary between insurers and industries.
Investing in PI insurance is a valuable move for business owners who wish to provide a better, more secure service. Having business insurance helps to minimise risks and encourages a stronger focus on a running a successful, reliable and trustworthy business.
Author: Jayde Ferguson
Founder of Toward Music, Jayde is a scripturient with a consuming passion to write. With 12 years experience as a freelance music journalist, she’s also a dedicated writer in the business industry with an undying love for typewriters & street press.