Professional indemnity insurance answers for money somebody else lost because of your work: advice that turned out to be negligent, a design that did not do the job, a report with an error in it, a deadline that was missed. It is the cover professional and advisory businesses are asked for by contract, and it behaves differently from every other policy a small business buys, because it responds to the claim rather than to the event.
What professional indemnity actually pays for
The policy answers for your legal liability to a client or a third party for financial loss arising from a negligent act, error or omission in your professional work, and for the cost of defending the allegation. It does not pay to put right work you simply did badly, and it is not a guarantee of your own outcome. The distinction that matters in practice is between physical harm, which is public liability, and pure financial loss, which is this. An architect whose drawing caused a wall to be built in the wrong place, a consultant whose forecast was negligently prepared, a bookkeeper whose error triggered a penalty: those are professional indemnity claims whatever the size of the business behind them.
Claims made, not events: why the policy has to outlive the job
Almost every professional indemnity policy in the UK is written on a claims made basis. It answers for claims first made against you during the period of insurance, whatever year the work was done in. That has two consequences people discover too late. The first is that letting the policy lapse after a project ends leaves the work already delivered with no cover at all, because there is no live policy for the claim to be made against. The second is the retroactive date: when you change insurer, the new policy must reach back over the years you were previously insured for, or those years quietly become uninsured. Run off cover is the same idea at the end of a business's life, keeping a policy in force after the last invoice.
Who is required to carry it
There is no general statutory duty in the United Kingdom, and that surprises people who have been asked for a certificate. What creates the requirement is either a professional regulator or a contract. Solicitors, accountants in practice, architects and financial advisers are required to hold it by their own regulator at limits that body sets. Everybody else is required to hold it because a client said so: corporate procurement and public sector frameworks name a limit, often one, two or five million pounds, and frequently require it to be maintained for a number of years after the engagement ends.
What decides the price
Underwriters rate professional indemnity on the work, not the trade name: the services you actually deliver, your fee income, the sectors of your clients, the size of the contracts you sign and your claims history. Two consultancies of the same size can pay very different premiums because one advises regulated financial clients and the other advises charities. The limit and the excess move the price more than anything else, and a limit bought to meet a single large contract will price the whole year. The starting prices in the record on this site are entry figures for liability cover and are not professional indemnity quotes.
Questions people ask about professional indemnity insurance
Is professional indemnity insurance a legal requirement in the UK?
Not in general law. It is required by regulators for some regulated professions, such as solicitors, accountants in practice, architects and financial advisers, and it is required by contract for most corporate and public sector work. For an unregulated consultancy the honest answer is that no statute demands it and most serious clients will.
What is the difference between professional indemnity and public liability?
Public liability answers for physical injury or property damage caused to other people. Professional indemnity answers for pure financial loss caused by your advice or work. A visitor tripping over your cable is public liability; a client losing money because your report was wrong is professional indemnity. Many businesses need both, and they are separate sections rather than one cover.
What does claims made mean?
It means the policy that answers is the one in force when the claim is made against you, not the one that was in force when you did the work. It is why continuous cover matters more than the length of any single engagement, and why run off cover exists for businesses that stop trading.
How much professional indemnity cover do I need?
Look at the contract first, because it usually states a figure. Where nothing states one, size it against what a client could lose if your work went wrong rather than against your fee, and check whether defence costs sit inside or outside the limit, because that changes how much cover the limit really buys.