How much does professional indemnity cost?

Professional indemnity insurance meaning

The easiest way to work out how much you should expect to pay is to get a tailored quote. But it can also help to know about the factors that affect your premium. For example, the size and nature of your business, as well as what type of clients it has, can all affect the cost of professional indemnity insurance.

We explain all you need to know in this guide.

How much is professional indemnity insurance?

Your professional indemnity quote will be tailored to your specific business needs, the risks you face, and a range of other factors. Understanding these factors can help you make a more informed decision when securing a policy.

For example, if you’re looking to lower the amount you pay – there may be adjustments you can make to your policy, like the amount of cover you take out. But, of course, it’s crucial to make sure you have enough cover to protect you in the event of a claim – insufficient cover could place a financial strain on you and your business.

The main areas that can affect your PI insurance premium include:

How much cover you need

Different businesses will require different levels of professional indemnity cover, with prices typically going up the more cover you take out. It’s worth noting, though, that there’s often only a small difference between significant amounts of cover. For example, there may not be that much difference in price between £500,000 and £1 million of cover.

In terms of how much cover is available – this tends to span from around £50,000 well up into the millions. For example, a freelance copywriter may feel £50,000 worth of cover is enough to protect them against the risks they face. While a larger business dealing with million-pound contracts may need millions of pounds worth of cover. In this case, the freelancer’s insurance quote would be considerably less than the larger business’s.

To work out how much cover you need, it’s best to think of the possible scenarios you might face in terms of a professional negligence, data breach, or breach of copyright claim, and the likely cost involved in putting them right.

Learn more about how much cover you may need in our guide: How much professional indemnity insurance do I need?

The nature of your business

Some industries are seen as riskier than others when it comes to professional indemnity claims. For example, a financial advisor – who’s poor advice could lead a client to suffer a significant financial loss – may be seen as more likely to make a claim than a recruitment consultant. In this case, the financial advisor’s insurance quote may be higher.

Each insurer will assess how common professional indemnity claims are in your industry. And this overall assessment of risk will, in turn, affect the cost of your premium.

The number of employees your business has

Some insurers consider the number of employees in your business as a factor that can affect your PI premium. For example, a sole trader who works alone may be seen as less exposed to risk than a company with 50 employees.

Your business turnover

There are a couple of reasons why having a higher business turnover can mean you pay more for professional indemnity cover. First, a higher turnover could indicate that you generally carry out a higher quantity of work. This could mean it’s more likely for a mistake to happen. Secondly, a higher turnover could mean that your business deals in very expensive contracts. Which means any claims you do face are likely to be more costly than claims made by a business with a smaller turnover.

Your experience

Some insurers will want to know about your general level of experience when determining a professional indemnity insurance quote. This is because someone who has been in their industry for many years may be less likely to make a mistake in their work than someone who’s just starting out.

Insurers may also be interested to know about things like the level of risk assessment a business carries out, as well as any relevant qualifications key stakeholders have.

Your business's professional indemnity claims history

Just like with car insurance, your claims history can affect your professional indemnity insurance quote. A business that has had to deal with a professional indemnity claim in the past, or any relevant legal disputes, may be seen as riskier to insure. 

The excess you’re willing to pay

Your professional indemnity insurance excess (usually a pre-agreed amount) is the amount you have to pay towards the overall cost of an insurance claim.  Some insurers may lower your monthly or annual cost if you increase the excess you’re willing to pay, although it’s crucial to make sure it’s still affordable.

Common scenarios leading to professional indemnity claims

Although the vast majority of business owners do everything they can to deliver accurate, high quality work for their customers – mistakes can happen. Below are some scenarios that can help illustrate how professional indemnity insurance claims arise:

• A company employee publishes a copyrighted image on the company’s website without obtaining the rights. This leads to a breach of copyright claim being brought against the company. The owner of the photograph seeks several thousand pounds in compensation.
• A private tutor provided a series of science lessons over the academic year to a GCSE science student who failed to achieve their expected grades. The student’s parents claims the private tutor missed out parts of the syllabus during tuition. The parents take legal action against the tutor requesting they pay for the exam fees and extra tuition fees.
• An IT contractor is hired to set up new booking software on a clients' website. Due to an error in the system the software showed zero availability to prospective customers.  The client wants to recover some of the lost booking revenue from the IT contractor.
• A client holds their accountant responsible for not telling them that they had to register for VAT because their income was above the VAT threshold. The client sues the self-employed accountant for the final amount they owe.

Working out your professional indemnity (PI) insurance cost

The only way to know for sure what you’ll pay for professional indemnity insurance is to seek a quote. This only takes a few minutes – you’ll just need to fill out a few details about your business before a quote is generated.

Most factors that affect your PI premium are outside of your control – like the size, nature, and claims history of your business. However, it’s possible to lower your premium by reducing the amount of cover you take out and increasing the excess you pay. If, after a thorough assessment, you realise you are currently over¬-insured, there’s nothing wrong with reducing your level of cover. Likewise if you can afford a higher excess, there’s no harm in increasing this.

However, it’s always worth remembering that legal claims can be unpredictable and may end up being more costly than you think. If you’re worried about this, read more on our help and guidance section, or contact us to discuss your options. 

*Price based on an IT contractor requiring £50,000 of professional indemnity insurance.

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