What is professional indemnity insurance?

Professional indemnity insurance explained

But there’s a lot more to this form of cover. For instance, you may wonder what is the professional indemnity cover type that you need to suit your business and the way it works? Or what is professional indemnity insurance in the UK going to do to help you out of a potentially expensive problem when you’re facing a claim?

That’s why we’ve put together this handy professional indemnity insurance guide; to answer your questions and cut through the jargon.

What is professional indemnity insurance needed for?

No matter how careful you are, or how long you or your staff have been in the trade, mistakes happen despite our best intentions. And with the digitalisation of many of our transactions and daily work routines, those errors can have profound, far-reaching effects that can become problematic quickly. Professional indemnity insurance is designed to protect you and provide peace of mind should those mistakes happen. Even the smallest of errors can lead to costly legal claims.

Do I need professional indemnity insurance?

Many professions need to have professional indemnity insurance as part of their respective industry body’s regulatory requirements. These include:

• Accountants
• Architects
• Chartered surveyors
• Counsellors
• Some therapists

However, even if you are not obliged to have PI insurance, without it, you could be liable for thousands of pounds of legal fees and compensation payments, not to mention lost income from the time spent defending any allegation.

• You are likely to need professional indemnity insurance if:
• You provide advice or professional services to your clients (including consulting or contracting)
• You provide designs to your clients (such as working as an architect or design engineer)
• You want to protect against allegations of mistakes or negligence in work you have undertaken for your client
• You work as a contractor, consultant, freelancer or self-employed professional, and your client has requested you arrange professional indemnity insurance in order to undertake a contract
• Your industry association/regulatory body requires you to have it.

Professions that might need professional indemnity insurance include (but are not limited to):

• Management and business consultants such as marketing consultants, training consultants and education consultants
• IT professionals including IT contractors, consultants, programmers and developers
• Technical and engineers contractors including CAD designers, project engineers and offshore oil and gas engineers 
• Recruitment agencies and recruitment consultants
• Designers such as web designers, graphic designers and interior designers
• Fitness professionals including personal trainers, dance teachers and yoga instructors
• Teachers and tutors including private tutors

Read our helpful guide if you’re asking yourself “How much professional indemnity insurance do I need?”

Do I legally need professional indemnity insurance?

Professional indemnity isn’t a legal requirement, but many potential clients will often only work with businesses or individuals who already have it in place. This also applies to many chartered bodies, who require businesses to have PI insurance if they wish to become members and benefit from all the professional benefits that this brings.

Think carefully about what your business does, and how valuable professional indemnity insurance could be to you. If you provide professional services or advice of any kind, it could be the difference between being covered and having to pay large sums of money from your own pocket should a claim land at your door.

You may also find yourself wondering if, due to the way your business operates, whether it’s worth getting professional indemnity insurance on a temporary basis. That’s a risky decision; we recommend that your policy runs continually to keep you covered against any unexpected claims at all times. Read our short term professional indemnity insurance guide to learn more.

If you need professional indemnity insurance advice, call us today on 0370 218 4509 or get a PI insurance quote in under 90 seconds here. 

What does professional indemnity insurance cover?

Put simply, professional indemnity insurance provides financial protection against claims of loss or damage made by clients or third parties, arising from your professional services, instructions or advice. This can include loss or damage caused by professional negligence, for example making a mistake in a piece of work or giving your client poor advice.

Professional indemnity insurance can also cover:

• Unintentional infringement of intellectual property – for example if you used someone’s picture in your advertising without their permission
• Defamation and libel – such as making a claim about a competitor that is untrue
• Unintentional breach of confidentiality – this could include sharing confidential client information without their consent
• Loss of documents or data

When a claim of this kind is made against you, professional indemnity insurance can cover your legal costs and expenses, incurred while defending the claim. It can also cover compensation costs awarded to the client or third party, if you are found to be responsible.

What doesn’t professional indemnity cover?

While PI insurance covers quite a few circumstances, there are also a few scenarios where you may not be covered. Generally, PI insurance doesn’t cover:

• Fines and penalties
• Any loss to your business that’s caused by mould, pollution or asbestos
• Injury to an employee
• Injury or loss in a joint venture (only your products/services would be covered by your insurance, and not the products or services of a partner)
• Circumstances that existed prior to when your cover started.

What is an example of a professional indemnity insurance claim?

A graphic designer was briefed by their client to provide price tags that would fit around the stem of Christmas trees. The tags would need to withstand exposure to the elements and stay fitted to the tree while it grew. However, the tags did not survive the test of time: the ink ran, rendering them useless to the client.

The client lost money due to this oversight and took legal action against the graphic designer for professional negligence. The graphic designer's professional indemnity insurance policy covered their legal costs and compensation payments to the client, a total cost of over £3,000.

Is professional indemnity insurance the same as public liability?

Public and products liability insurance is different to professional indemnity insurance for a number of reasons. The most obvious difference is that while professional indemnity insurance covers you for claims brought against you for the work you produce (or the professional advice you provide), public liability insurance covers you against client claims of injury or property damage and loss incurred within the UK and happening in connection with your business.

For further information, check out or helpful guide: Is Professional Indemnity Insurance the Same As Public Liability?

Professional indemnity insurance jargon

If you’re confused about the terminology associated with professional indemnity insurance, we explain some of the jargon below.

What's the difference between an 'any one claim' and an 'aggregate' policy?

'Any one claim' and 'aggregate' refer to the basis of cover on a professional indemnity policy.

An 'any one claim' policy provides cover up to the full limit for each individual claim made in the period of insurance, whereas an 'aggregate' policy provides cover up to the full limit for all claims made in the period of insurance.

To put this into context, if two £75,000 claims are made against a £100,000 any one claim professional indemnity policy, the insurer would cover the costs of both claims, as they are both under the £100,000 limit.

If two £75,000 claims are made against a £100,000 aggregate professional indemnity policy, the insurer would only pay up to the £100,000 limit. As the claims total £150,000, the remaining £50,000 would need to be covered by other means.

Although any one claim is generally considered the more comprehensive option, the basis of cover varies from insurer to insurer depending on your business activity.

What does 'claims made' mean?

A 'claims made' policy provides cover for claims that are made and notified to the insurer during the period of insurance.

If your policy has a retroactive date exclusion, this means that the wrongful act (the alleged mistake, error or professional advice that has led to the claim) must have occurred after the date stated in your policy.  Acts committed prior to this date will not be covered. If your policy does not have a retroactive date, it doesn't matter when the wrongful act occurred – you will still be covered by the policy. This application of retroactive dates vary by policy and insurer.

However, in either case, if the policy is cancelled or not renewed, cover will end and any subsequent claim – regardless of when the wrongful act occurred – would not be covered by that policy. As such, it's important to have professional indemnity insurance cover in place, even between contracts or work, to ensure your business is protected.

All Markel Direct professional indemnity insurance policies are on a 'claims made' basis. This contrasts with a 'claims occurring' policy which provides cover for claims which occur during the period of insurance. Professional indemnity policies are rarely, if ever, written on this basis. It is more commonly found with public liability and employer's liability policies.

What is 'run off' cover?

Run off cover insures against claims of professional negligence brought against you after your business has ceased trading. This could be, for example, if you have sold your business or closed it down. It is particularly important for retired business owners to consider. Without run off cover in place, they would have to fund the defence of the claim out of their own back pocket.

Get an online quote for your professional indemnity insurance in under 90 seconds.

How much does professional indemnity insurance cost?

At Markel Direct, we offer professional indemnity insurance from £8 a month for £1 million worth of public liability cover*. When it comes to insurance, the cost varies from business to business depending on:

• The size of your business - your turnover and whether you have any employees
• The level of cover you choose
• The types of projects you work on and the equipment you use.

To get a clearer idea of how much you’ll pay, simply get a quote online.

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

Why should I choose Markel Direct for professional indemnity insurance?

With over 25 years’ experience in business insurance, you can trust Markel Direct when it comes to robust, reliable financial protection. Our experienced solicitors are available 24 hours a day, 7 days a week to give you legal advice when you’re facing a legal claim. There are no hidden fees either – we’re completely transparent when it comes to cost and if you want to change or cancel a policy, you won’t be charged any extra fees.

You can also get a PI insurance quote in under 90 seconds when you fill in our easy online form. Just use the button below or call our team today on 0370 218 4509 to discuss your needs.