Do I need Professional Indemnity Insurance?
Do I need my own Professional Indemnity Insurance?
If you or your business provides professional advice for a fee, then it is encouraged to consider the benefits and need professional indemnity insurance to protect against the exposure to claims from your clients and third parties. Whether there is any merit or truth to an allegation made against you by your client it is often going to require legal assistance in order to resolve the matter.
Unless your business has a high level of cash flow that can afford the defence of litigation then the cover is going to benefit you. Even if you do have the ability to afford defending a claim made against you those are profits that could have otherwise been used elsewhere within your business as opposed seeing them go to the pocket of another business (your lawyer!).
Who needs Professional Indemnity Insurance Australia?
Most businesses that provide advice for a fee or professional services are going to be needing Professional Indemnity Insurance in Australia. Regardless of the exposure to your business and decision to insure against it there are other factors that might determine if you need your own cover too:
- Legal obligations to maintain cover as part of your industry (e.g. Architects, Accountants)
- Contractual obligations (i.e. your client stipulates under formal agreement the need to maintain cover)
Most insurers advertise the different types of industries they are prepared or not prepared to quote – here is an example list from Liberty Specialty Markets:
https://assets.libertyspecialtymarketsap.com/appetite-guides/pfr-appetite-guide-au/
WHETHER YOU REQUIRE PROFESSIONAL INDEMNITY INSURANCE DEPENDS ON THE TYPE OF SERVICES YOU PROVIDE
What happens if I don’t have Professional Indemnity Insurance?
If you do not have your risk insured then it means your business will be exposed to covering the commercial loss associated with responding to any financial demands made against your business (i.e. damages, legal defence costs, court costs).
In situations where you have failed to insure for PI insurance (i.e. as required at law or under a contract of service with your client) then you will always be exposed commercially as claims for this type of situation are excluded by Professional Indemnity insurance policies.
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