Professional Indemnity Insurance is used by any small business, tradesman or sole trader to indemnify themselves against any claim for damages they may be liable for due to damage caused to their client’s property or business, through error or negligence. Over the last decade there has been a significant increase in the number of claims of this type made against small businesses. This is primarily due to the heavy focus on I.T. and technology of many small business service providers. Professional Indemnity Insurance is now a regulatory requirement for some types of business, regardless of their size.

Who needs Professional indemnity Insurance?

Any small business which undertakes any work, or offers any service based upon the skillset of the business and its employees may be required by law to have adequate Professional Indemnity Insurance cover. Examples of the types of service company which must have Professional Indemnity Insurance are accountants, solicitors and financial advisors.

Furthermore, any business which offers a service to customers which if undertaken badly, could lead to a significant loss in revenue for the clients business should consider taking out some form of Professional Indemnity Insurance policy. Many small businesses do not understand the depth of their responsibility with regards to damages to a client’s income or property. Consider a self-employed PC engineer, this is a very basic business model, but what happens if the engineer, through a genuine mistake, causes a loss of data to a client which results in damage to their business? In this case, the client would make a damages claim, and if the PC engineer has no form of Professional Indemnity Insurance, they would be liable for all costs personally.

Things to look out for when procuring Professional indemnity Insurance

There is only one major area which may cause a problem for any small business that is seeking Professional Indemnity Insurance. Namely, that they must be entirely sure that the level of cover is adequate to protect them in a worst case scenario. If the business is in the B2B marketplace, and could potentially cause a significant loss of revenue to a customer’s business through negligence, then the level of Professional Indemnity Insurance cover should be equally large. Most good insurance providers will be able to advise a small business about industry averages for damages claims, and aid in evaluating exactly how much cover is required.