Professional indemnity insurance. Cover for the day a client says your advice cost them money.

Quick answerProfessional indemnity insurance covers the cost when a client claims your advice, design, report or professional service caused them a financial loss, through negligence, an error, an omission or advice that turned out to be wrong. It pays your legal defence costs and any damages or settlement, up to the limit of indemnity you choose. It is separate from public liability insurance, which only responds to physical injury or property damage.

At its core, professional indemnity insurance covers breach of professional duty: work that fell below the standard a reasonably competent person in your line of work would have delivered. That might be an accountant's advice that triggered a tax penalty, an engineer's calculation that under-specified a structure, a consultant's report that missed something material, or a marketing agency's campaign that breached someone else's trademark.

Most policies also extend to a handful of related risks that catch people out if they are missing: breach of confidentiality or privacy, unintentional infringement of intellectual property, defamation arising from your professional work, and the dishonesty of an employee, usually only once fraud is proven and usually excluding the owner's own dishonesty. If you use subcontractors or other consultants on a job, check whether their work is covered under your policy or needs its own; whether it flows through automatically depends entirely on the wording, so it is worth checking specifically rather than assuming.

The sum you are insured for is called the limit of indemnity, and it is rarely your choice alone. Many contracts, tenders and regulators specify a minimum, so the right limit depends on what you actually sign up to, not a generic number a comparison site gives you. In practice, most of the clients we place carry somewhere between $1 million and $2 million. Government departments and large corporations tend to ask for more: a $10 million limit is a common contractual requirement on tenders and head contracts, so if you chase government or corporate work, check that number before you quote on the job, not after you have won it.

Two mechanics inside that limit matter as much as the number itself, and neither gets asked about by a comparison site. First, check whether the limit applies on any one claim or in the aggregate across the whole policy period. An aggregate limit that looks generous on day one can be worn down by an earlier claim, leaving less than you think available for the next one. Second, check whether your legal defence costs sit inside that limit or on top of it. A costs-inclusive limit means every dollar spent defending you is a dollar less left for damages, so a $1 million costs-inclusive limit can leave far less real protection than a $1 million costs-exclusive one. Most policies also carry an excess, a fixed amount you carry yourself on every claim before the policy responds, and it is worth knowing that figure before you need it rather than when a claim letter arrives.

An online PI quote asks what you do and how much revenue you turn over, then gives you a number. It will not ask when your last policy's retroactive date was, whether your contracts require a specific limit of indemnity, or what happens to your cover if you take on a business partner next year. Those questions are exactly where professional indemnity insurance goes wrong, and they only get asked by someone who is actually looking at your situation rather than selling you a product off a shelf.

When we place or review a professional indemnity policy, we check the retroactive date against your actual practice history, not just against the policy you are replacing, because a gap two insurers back can still be sitting there unnoticed. We check your limit of indemnity against what your contracts, tenders or licensing body actually require, because being underinsured on a limit is the same failure as being underinsured on a building, just with your own name attached instead of an address. And we flag run-off cover before you need it, at the point you take on a partner, change your business structure, or start talking about winding things down, not after the policy has already lapsed.

That same read-the-fine-print habit is why we look past the label on the request in front of us. A lot of the professional services and information and technology (ICT) consulting clients who come to us for "a PI quote" are running a business whose biggest real risk sits somewhere else entirely. A business that designs websites, builds brands, runs SEO or manages digital marketing and advertising for other companies is giving professional advice, that part is true, but its heaviest exposure is usually what happens if a client's data is breached, if a logo or an image turns out to infringe someone else's copyright or trademark, or if content it published on a client's behalf lands the client in a dispute. A standalone professional indemnity policy responds to negligent advice. It was never built to carry a cyber incident, a privacy breach or an intellectual property dispute at the scale a content or digital business actually faces day to day. For that client, a combined policy that bundles professional indemnity together with cyber and public liability cover in one product is usually the properly protected answer, not three separate afterthought decisions, or one cheap policy that only ever covers one of the three risks it is carrying. See Cyber Insurance for what that risk looks like on its own. This is exactly the kind of gap a generic online PI quote has no way of catching, because it never asks what your business actually does.

That is the whole difference between buying professional indemnity insurance and being properly protected by it. Anyone can sell you the first. Getting the second takes someone who reads the fine print for a living.

Sitting on a problem instead of notifying it. In our experience this is by far the biggest and most costly mistake small business owners make with this cover. Under a professional indemnity policy you must notify your insurer once an event occurs, even if it is only a notification and nobody has formally complained yet. If you already suspect a job might turn into a claim, tell your insurer in writing before your policy expires. Wait until renewal and you may have lost the right to claim on it at all.

Buying public liability and assuming it covers advice. It does not. If a client's loss came from what you told them or produced for them, not from a physical accident, only professional indemnity insurance responds, and finding that out after a claim is the worst possible time.

Switching insurers for a cheaper premium without checking the retroactive date. A quote that looks 20% cheaper is not a saving if the new policy's retroactive date resets to today, because every year of past work before that date is now uninsured. Ask the exact question before you switch: what date does this policy go back to, and does it match what I already had.

Cancelling the policy the day you stop trading. Whether you retire, sell up or wind up a company, the exposure to past work does not end when the policy does. Without run-off cover, a claim about a job from three years ago has nothing to respond to it, and by then it is too late to buy the cover you needed.

Setting the limit of indemnity to whatever is cheapest rather than what your contracts require. Most of the clients we place carry somewhere between $1 million and $2 million, which covers most day-to-day work, but government tenders, head contracts and some licensing bodies commonly set a $10 million minimum, and quoting under that figure is not a discovery you want to make once you have already signed the contract.

Assuming a subcontractor's work is covered under your policy. If you engage other consultants or tradespeople on a job and something they did goes wrong, whether that flows back to your policy depends on the wording, not on common sense. Check it before the job starts, not after the complaint arrives.