What does Professional Indemnity Insurance cover?

What does a Professional Indemnity policy cover?

Professional indemnity insurance covers the policyholder for the costs of legal action made against them in respect of financial loss which occurs due to the negligence, error, or omission in professional advice or services provided by your business.

The coverage provided by professional indemnity insurance can be understood in two categories:

• Defence costs
  
• Legal liability

Should a client bring legal action against your business alleging that you, or an employee acting for your business, has caused a financial loss due to error, omission, or negligence in the provision of your services the professional indemnity policy will cover the legal representation/defence costs as necessary. Should the outcome of such a legal dispute be that your business is liable, the policy will also pay the financial liability owed, up to the limit of indemnity on the policy.

Do I need retroactive cover?

Retroactive cover refers to coverage for services undertaken previously.

Professional indemnity insurance will include an exclusion whereby any claims relating to services provided prior to the 'retroactive date' are excluded. This is important as for the majority of negligence claims it is possible for a claim to be brought against you for services provided up to 6 years ago.

Professional Indemnity insurance operates on a 'claims-made' basis which means it is the policy in force at the time the claim is made, for example when the negligence proceedings are brought against you, that will react to the matter and not the policy in force at the time of the negligent act.

Qdos Professional Indemnity policies include retroactive cover as standard for all non-IT trades. This means that your retroactive date will display as 'None', as there is no retroactive limit on your policy.

For IT trades, Qdos offer optional retroactive cover for an additional premium. Simply add 'Cover For Past Work' when building your quote. You will prompted to do so if this applies to you. You may wish to include retroactive cover if:

• You have had a gap in your cover
  
• You have changed insurance provider from another company
  
• If you have not previously been insured but have provided services in the past which require cover
  

Find out more about whether you should keep your PI policy in place

How much PI cover do I need?

Professional indemnity policies can be purchased with a range of indemnity limits (limits of cover). Qdos policies are offered with indemnity limits of £1 million, £2 million and £5 million.

In order to determine the level of cover you may need, you should:

• Check your contractual agreement where applicable for clauses which require a level of cover to be held
  
• Assess the risk of your business - those providing professional advice to large clients such as high street banks or handling large amounts of data on behalf of a client, may be at risk for higher value claims