PI insurance is professional indemnity insurance. It covers the money somebody else loses because your professional work or advice was wrong, and the cost of defending the allegation. It is what client contracts and professional bodies mean when they ask for indemnity cover.
What it covers
A negligent act, error or omission in professional work, and the financial loss that follows for the client or a third party. Not injury, which is public liability. Not damage to property, which is public liability too. Not the cost of redoing work you simply did badly, which is your own problem.
Who needs it
Anybody whose output somebody relies on: consultants, designers, engineers, accountants, solicitors, IT contractors, recruiters, therapists, architects, surveyors, and increasingly trades that design or certify as well as build. Several regulated professions must hold it; most other businesses meet it as a client requirement.
The one feature that makes it different
It is written on a claims made basis. The policy that answers is the one in force when the claim is made, not the one in force when the work was done. That means it must be kept continuous long after a project ends, and that changing insurer without matching the retroactive date can strand years of past work.
A worked example, because the words are abstract
A consultant is engaged to recommend a system. The recommendation is made without checking a constraint the brief named, the client buys and implements it, and eighteen months later has to replace it. Nobody was injured, nothing was broken, and the client is several hundred thousand pounds down. The claim is for that loss and for the cost of arguing about whether the constraint was really in the brief, and both of those are what professional indemnity pays.
Questions people ask about what is pi insurance
What does PI stand for?
Professional indemnity. It is the standard abbreviation in UK contracts and broking.
Is it the same as public liability?
No. Public liability covers physical injury and property damage; PI covers pure financial loss from your work.
Why does it have to be continuous?
Because it is claims made: the live policy answers, whenever the work was done. A gap leaves completed work uninsured.
Is it compulsory?
For several regulated professions, yes. For everybody else it is a contract requirement rather than a legal one.