The Worst Advice We've Ever Heard About Professional Indemnity

The Worst Advice We've Ever Heard About Professional Indemnity

Misinformation can be dangerous, and insurance is no exception. This is why it's so important to listen to people who know what they're talking about.

Here are the biggest falsehoods we hear about Professional Indemnity insurance in the industry which, if listened to, could land you in some hot water.

“Your contract has finished, you can cancel your PI cover” – WRONG!

Professional Indemnity policies are written on what is known as a “claims made” basis, what this means to us simple folk is that you need to have a policy in place:

  • When you carry out the work or provide advice
  • AND when you receive any potential claim against you

If you cancel your policy and you subsequently receive a claim against you, then your PI insurance will not respond, and you will be left to deal with a business threatening claim on your own.

“You just need Professional Indemnity cover to get paid” – DANGEROUS!

Providing a copy of your indemnity policy is often a requirement before a company will make payment for a consultancy contract.  

This can create urgency, and we have seen professionals grab the first policy they can find without thoroughly checking the cover.

If you do need to cover to activate payment, make sure that the policy provides “retroactive cover” for the work you have carried out.

Without this, it really is just a piece of paper and will not offer any protection for services or advice before purchase.  

Not only that, a savvy procurement team may check your wording and reject payment of your invoice, which is precisely what you were trying to avoid!

“All PI policies are the same” – NO!!

You could blame the insurance industry itself for this one, sadly, we’ve seen some a worrying trend of very basic professional indemnity policies providing limited cover.

It’s a bit like using an umbrella from the pound shop to protect you from the rain, it does provide some cover, but expect a few leaks and holes to evolve!

A watertight PI policy will provide full civil liability cover for any legal challenges from advice provided.

Whereas a lesser policy will be written on a Negligence Only basis, leaving losses around contractual issues to fall through the cracks.  

(More details on Civil Liability vs Negligence only can be found here.)

“You’ll be fine with an aggregate limit” – TAKE CARE!

In our article on Aggregate vs Any-one-claim limits, we highlighted some of the genuine issues.

For some businesses, the main risk is a single substantial loss, as such, an aggregate limit may suffice.

However, if you operate across a large number of customers and have exposure to multiple claims, then you could quickly exceed an aggregate loss limit and leave your business horribly exposure.

For example, if you provided similar advice to numerous clients, and they all made separate claims against you.  

In these circumstances, you really need to consider an “any-one-claim” limit.

How can I find the right cover?

If it looks too good to true, it probably is! When you compare Professional Indemnity Insurance prices and cover, make sure you check the small print and cover before you buy.  

Better still, speak to a professional expert who can compare prices for you and give you peace of mind that you’re adequately protected.

Check out our video explaining Professional Indemnity cover!

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At Insync, we offer a free consultation with one of our PI Insurance Gurus.  Call us on 0330 1240730 to find out more, or book a slot on our website at a time that suits YOUR business.