How much professional indemnity insurance do I need?

How much professional indemnity insurance do I need?

Business liability insurance is slightly different to other types of insurance. Whereas with your home and car insurance you are usually given a standard limit of cover (the maximum amount your insurer will pay out), with professional indemnity insurance, you will be given a range of limits to choose from.

So, which limit should you choose? This is one of the most common questions we are asked by our customers and there are a number of ways you can decide.

Option one: check with your client

If you’re undertaking a contract for a specific client, they may well have specified a minimum amount of cover required for you to undertake the contract. If they have, you can simply choose this level of cover when buying your policy in order to meet their requirements.  You can of course choose to buy a higher limit, but this is purely down to you.

If they’ve specified that you need to have professional indemnity insurance but don’t state a limit, it may be worth checking with them how much they would consider acceptable before you buy.

Option two: check with your industry body

If you are a member of an industry body (common in fields such as accounting, surveying and engineering), they may require you to hold a minimum level of cover in order to be a member. Details about minimum cover requirements are usually contained in your membership agreement, but if you’re unsure, speak to your industry body directly to find out.

Option three: decide for yourself

If you simply want to arrange cover for all work you undertake, the best way to choose your limit of cover is to consider a worst case scenario and how much you think it could cost to put right. For each project you are working on, take into consideration:

  • The cost of getting a third party to rectify a serious mistake you’ve made – depending on the type of work you do, this could be very costly in itself
  • Any consequential losses your client would incur as a result of your mistake - for example, lost sales or missed business opportunities
  • Any legal fees incurred by your client in pursuing you – these can easily run into hundreds, if not thousands, of pounds
  • Any damages or compensation due to your client – usually decided by the courts unless a settlement is agree

For a start-up business with a relatively low projected income, a £50,000 limit may be enough to begin with – but this depends on the industry you are working in and the type of work you undertake; only you can make this decision. 

For more established businesses and contractors working with several clients on large contracts, £1m is one of the most popular limits and may be better suited to their needs.

Need a quote for professional indemnity insurance?

Get an online quote in 90 seconds now – we offer a range of professional indemnity insurance limits from £50,000 to £5m, starting at just £6 a month.

Still confused? Call us on 0800 640 6600 – our insurance experts will explain your options in plain English and answer any questions you have.

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