Professional indemnity insurance caters to professionals who provide services or advice to their company’s client base or customers. This type of policy mainly involves protection against legal claims and costs for possible damages toward third parties, which may rise through an act, breach or omission of professional duty within the course of a business.
In the event of an omission or a mistake within the course of the work resulting to injury or financial loss to a third party such as a customer – that customer therefore will have the option to take legal action to recover the loss incurred.
Professional indemnity insurance is aimed to protect both the assets and reputation of a business.
Who is covered under a Professional Indemnity policy?
This kind of insurance policy is designed to cover not just your business, but also any other principal, director, partner, employee or any related entity while acting within the scopes of their duties.
Why Do You Need Professional Indemnity Insurance?
Protecting yourself against any professional conduct claim could cost you a lot of money, time, as well as prevent damages to your reputation regardless of whether the allegations levelled against you are founded or not. If things don’t pan out on your favour, it is likely that you will be held responsible not just for the actions you have committed, but also for those of your employees, partners or even volunteers.
All professionals have to ensure their own protection against unfounded accusations and breaches to professional duties. A professional indemnity policy can safeguard both you and the business through the provision of cover from such claims, which would include the cost it requires for defending the action. That way, you can conduct your business with enough confidence that your reputation and assets are both well protected.
How Much Cover Do You Need?
To calculate or even estimate the coverage of your professional indemnity insurance needs can be quite a daunting task. Every business is a unique entity, there’s not a single size that fits for all. Since the circumstances can be different, particularly with the complaints and claims made against you by third parties or customers, the costs may vary too.
It would make sense for anybody who gives advice or provides services to consider professional indemnity insurance.
In the event you need to work out the coverage estimation for yourself, these factors need to be considered:
- The size of a contract you are about to undertake and the kind of client you are working for
- Possible costs it would incur to defend yourself if a claim were to be made against you or your business
- Maximum compensation that can be given against you (consider how much you are paid for the work)
Australian job sectors and industries vary from one another, which simply means requirements for each sector or industry differ. If things with work seem to be going well, envisaging a scenario in which your client is unsatisfied enough to file a claim against you can be difficult.
It pays to cover yourself be prepared for the worst. Professional indemnity insurance truly is a necessity for all professional businesses.