How much professional indemnity insurance do I need?

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The right level of cover for your business depends on the company size and the type of work you are doing. Find out more in our FAQ Hub.

The level of cover you’ll benefit from depends on the size of your business and the type of work you are doing. For example, a start up with a relatively low turnover may only require a low level of cover to start off with (approximately a limit of £50,000), while a larger organisation may find security in a higher level of cover (a £1 million limit being a common choice).

When you buy insurance, whether it’s for your home or your business, you’ll be asked how much professional indemnity insurance you want to buy. And because each business is unique, there’s no one-size-fits-all solution. Hiscox offer cover up to £10,000,000.

If you’re unsure about how much cover your business needs, here are a few things to consider when choosing what level of PI is appropriate:

Contractual requirements

The first thing to check is whether your clients require you to hold a specific amount of professional indemnity insurance. It is common for businesses to require their suppliers to hold certain types and amounts of insurance so that if a mistake arises all parties are protected by an insurer. If you are supplying professional services to a client, they may ask you to have professional indemnity.

You should review your contracts carefully to check if you need to hold a specific amount of professional indemnity cover.

If you are a member of a professional body, such as the ACCA, your professional body may also require you to hold a certain amount of professional indemnity insurance as a condition of your membership.


The value of your contract

An important factor to think about is the size of the contract you have with your client. If your client is not happy with your work, they may try and bring a claim against you to recover money they have paid you. You should ensure you have a limit of indemnity to cover this.

If there is a problem with your work, that problem can have a knock on effect on your client and the project you are working on. You could be liable for losses your clients suffer as a result of your mistake, and that cost will often exceed the amount your client paid you in the first place.

If a problem with your work causes a client to have to delay or restart a wider project you could face a claim for the value of the overall project. You should consider the size of the project you are working on, and the likelihood a mistake could impact a wider project. You might want to make sure you have a high enough limit of indemnity to cover a claim for all, or part of the total project cost. Think of the worst-case scenario and how much it could post to put it right.


Compensation & legal costs

If the worst comes to the worst, a client may ask for compensation to cover the money paid out to you, as well as the cost of rectifying any mistake you make. Think of the worst-case scenario and how much it could post to put it right.

As well as potentially being required to compensate your clients, there may be legal costs to pay for the investigation and defence of your case. Don’t underestimate how much this could potentially cost.


Getting professional indemnity peace of mind

When you run your own business, the responsibility for getting things right sits firmly on your shoulders. While it may seem like a lot to consider, particularly if your business has never faced a claim situation before, it makes sense to get the right level of protection should the worst happen. This will ensure you have the appropriate legal support and the financial means to get your business back on track as quickly as possible.

Choose a standalone product or get covered as part of a comprehensive business insurance package.

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