What is Professional Indemnity Insurance?
Professional Indemnity Insurance, often called PI or PII, helps if your advice, design or service causes a client a financial loss. It pays for your legal defence and, if you are found liable, the compensation. Many contracts ask for it upfront. You can learn more about professional indemnity insurance and how it works.
This cover is built for people who sell expertise, such as consultants, engineers, accountants, designers and IT contractors. If a client says your work was wrong, late or misleading, PI steps in. Common limits start at £100,000 and go up to £10 million for higher risk work.
It is not a legal requirement for every profession, but some regulators and trade bodies require it. For example, many architects, solicitors and accountants must hold minimum limits to stay compliant. Even when it is not mandated, clients often set a limit in the contract, usually at least £1 million.
Here is a plain example. You deliver a report with an error. Your client follows it and loses £250,000. They sue you for negligence. Your PI policy pays for a solicitor to defend you, covers expert witnesses and, if needed, the settlement, up to your chosen limit.
What the experts say…
"Professional Indemnity Insurance is the safety net for advice based work, it pays to sort it before you sign contracts."
– Ian Beevis, Founder of Clean Green Compare
What is covered with Professional Indemnity Insurance?
PI focuses on financial loss caused by your professional services. It usually covers legal defence costs as standard, then any compensation you are liable to pay, up to your limit. Policies are written on a claims made basis, meaning they cover claims first made and reported during the policy period, subject to your retroactive date.
- Professional negligence – Covers allegations that your advice, design or service fell below the required standard and caused loss. Example, a miscalculation in a structural design delays a build, the client seeks £400,000. The policy funds defence and, if you are found liable, pays damages up to your limit.
- Unintentional breach of contract – Some policies cover financial loss from a breach linked to your professional duty. Example, a missed milestone triggers client costs and they sue. Limits follow your main policy, check if defence costs are inside or outside the limit.
- Defamation, libel and slander – If a statement in your report harms a competitor’s reputation, PI can cover defence and damages. Many policies include a sub limit, for example £250,000, so check if this sits within the main limit or as a separate cap.
- Breach of confidentiality – If you share sensitive client data by mistake, PI can cover claims for resulting financial loss. Example, an email sent to the wrong person triggers a claim. Fines are usually excluded, but civil claims from clients are often covered, up to your chosen limit.
- Intellectual property infringement – Unintentional use of a third party’s content, for example an image or code snippet, can lead to claims. Many policies include this, often with a sub limit, for instance £250,000. Intentional infringement is not covered, and US claims may need a special extension.
- Loss of documents and data – Pays to replace or restore client documents you lose or damage, whether paper or digital. Example, you fund data recovery after a corrupted file. Limits vary, for example £50,000, and may exclude hardware and cyber events, check the wording.
- Mitigation costs – Reasonable costs to fix a mistake before a formal claim, with the insurer’s consent. Example, you pay to re run testing to avoid larger losses. Policies require you to notify quickly, and cover only applies if it reduces the overall claim cost.
- Court attendance and investigation costs – Pays a daily rate if you or your staff must attend court as witnesses. Typical allowances are capped, for example £250 per day per person, with an overall limit. This sits within or alongside the main policy limit, check your schedule.
Match your cover to the risks in your contracts, your client profile and the potential cost of failure. If a worst case mistake could cost millions, a £1 million limit may be too low. If you take on public sector or enterprise clients, they may demand higher limits and specific clauses.
Optional extras you can add to Professional Indemnity Insurance
Add ons plug gaps that PI does not cover, like injuries, property damage or cyber events. Consider them when contracts ask for wider protection, or when your work exposes you to more than pure financial loss. Extras usually increase the price, but they can stop a costly gap.
Covers injury to others and damage to their property caused by your business activities, not your advice. Example, you spill coffee on a client’s laptop during a meeting. Limits often start at £1 million, higher limits cost extra, and this is not standard on PI policies.
If you have employees, this is a legal must in the UK, with a £5 million minimum limit. It covers staff injuries or illness caused by work. It is not part of PI and is bought as an extra. You will pay an additional premium and may need to show health and safety steps.
Covers data breaches, cyber attacks and related costs like forensic help and notification. PI may cover client claims for confidentiality breaches, but it will not fund ransomware recovery. Cyber is a separate policy or add on, with limits from £100,000 to several million.
Protects directors and officers for claims about management decisions, for example breach of duty. PI protects the business’s professional work, D and O protects individuals. It is not standard and needs an extra premium, limits often start at £250,000 or £1 million.
Covers theft of money or property by employees. PI excludes criminal acts, so this fills that gap. Not standard, and higher risk businesses will pay more. Limits are usually sub limited, for example £50,000, and strict conditions and controls will apply.
Provides ongoing protection after you stop trading or retire. Claims can arrive years later, so run off matters. Many professionals keep run off for six years, aligned with common limitation periods. It is not automatic and costs extra each year.
Extends cover to work governed by non UK law, especially the US and Canada. Standard PI often excludes these. Add this only if contracts require it, as premiums and excesses are usually higher for North American jurisdictions.
Some sectors, like construction, need cover for collateral warranties and duty of care deeds. This is not always standard. Ask for confirmation in writing, as insurers may add endorsements, and an extra premium can apply.
Insures laptops, phones and kit you use for work, at your premises and on the move. PI will not cover physical items. This sits under a separate policy section, with single item limits, for example £1,500, and an excess on claims.
Some insurers let you pay more for a lower excess, or accept a higher excess to cut the price. This can help with cash flow. Check whether the excess applies to defence costs, as many PI policies waive the excess on defence only claims.
Pick extras that fit how you work and the risks you face. If you visit clients or have staff, public and employers’ liability are often essential alongside PI.
What is not usually covered?
Every PI policy has limits and exclusions. These keep the cover focused on professional mistakes, not general business risks. Read the wording, ask for plain language explanations and watch for sub limits. Tell the insurer about anything unusual in your work.
- Known claims and circumstances – If you knew about a problem before you took out the policy, it is usually not covered. Claims made cover relies on prompt notification. Tell the insurer as soon as you are aware of a complaint or a likely claim, even if no money is demanded yet.
- Deliberate, criminal or fraudulent acts – Intentional wrongdoing is excluded. PI is designed for mistakes, not dishonest behaviour. If a rogue employee acts dishonestly, a separate fidelity cover may help. Directors knowingly allowing a wrongful act will not be protected under PI.
- Fines and penalties – Regulatory fines, taxes and penalties are commonly excluded, for example GDPR fines. However, civil claims from clients for financial loss due to a breach of confidentiality may be covered. Check the difference in your wording and the role of cyber insurance.
- Bodily injury and property damage – PI focuses on pure financial loss. Injuries or physical damage usually fall under public liability insurance. There are narrow exceptions, for example if injury arises from your professional duty, but these are rare. Keep both covers if you meet clients in person.
- Contractual guarantees and warranties – Promises to deliver a result beyond reasonable skill and care can be excluded. If you sign unlimited liability or meet the client’s full financial risk, insurers may not cover those terms. Negotiate caps and stick to a duty of care standard.
- Work outside declared services – If you take on tasks outside the scope you declared on your proposal, cover may not apply. Keep your business description accurate. Tell your broker if your services expand, for example moving from web design into data analytics.
- US and Canada jurisdictions – Claims brought in US or Canadian courts are often excluded unless you buy the extension. Even with cover, higher excesses and limits can apply. Only include these jurisdictions if your contracts demand it, as prices usually rise.
- Insolvency and trading debts – PI will not pay general business debts or refunds because of poor cash flow. It addresses liability for professional errors. Keep clear records that show scope, deliverables and acceptance, which helps avoid disputes becoming debt claims.
Who needs Professional Indemnity Insurance?
Anyone who gives advice, designs, audits, or provides expertise that clients rely on. It matters when a mistake could cost a client money. Many tenders and frameworks require it before you can start. Even small projects can create big liabilities. Freelancers and micro businesses are not immune, a single claim can be life changing.
- Management consultant delivering strategy – Recommendations that change a client’s operations can misfire. If revenue drops after they follow your plan, they could claim a financial loss. PI covers defence and damages, helping you protect your reputation and meet contractual requirements, often £1 million or more.
- IT contractor configuring systems – A misconfigured cloud setting exposes data, the client suffers downtime and costs. PI can cover the client’s financial loss claim. Add cyber insurance for breach response and first party costs, as PI will not cover ransomware recovery.
- Architect, engineer or surveyor – Design or measurement errors can delay projects and trigger large costs. Many professional bodies require minimum PI limits. Contracts often demand higher limits, for example £5 million any one claim, to match the project scale.
- Accountant or bookkeeper – A mistake in tax advice or filings can lead to penalties and client losses. Regulators and clients expect PI. It funds legal defence and eligible compensation, and run off cover protects you after you retire or sell your practice.
- Marketing or creative agency – A campaign uses an image without the right licence, the rights holder claims. PI can cover unintentional IP infringement and client loss from misleading claims. Public liability is useful too if you work on client sites.
- Recruitment agency – Recommending an unsuitable candidate can cause client costs and disruption. PI can address the financial loss claim. Add vicarious liability cover if you supply contractors, and check contractual indemnities with end clients.
- Estate or letting agent – An error in particulars or tenancy handling can cause a loss. PI can respond to negligence and defamation claims. Some schemes and memberships need proof of PI at set limits to join listings or panels.
- Trainer, coach or HR advisor – Advice that leads to an employment dispute or failed programme can prompt a claim. PI funds defence for alleged professional negligence. Add public liability for workshops, and ensure contracts cap your liability to a fair level.
If your work guides decisions, PI is a practical safety net. It helps you trade with confidence and meet client expectations.
Get Professional Indemnity Insurance Quotes Today
How to get a Professional Indemnity Insurance quote
The process is quick if you have the right details. Be clear about what you do, your turnover and your contracts. Choose a limit that matches the worst case loss a client could suffer. Tell the insurer about any past complaints, even if no money changed hands.
How much does Professional Indemnity Insurance cost?
Prices vary by profession, contract terms and your chosen limit. Higher risk work, tight deadlines and big clients tend to push costs up. A £1 million limit usually costs far less than a £5 million limit, because the insurer’s potential payout is bigger.
- Limit of indemnity – Higher limits increase the price. Moving from £1 million to £5 million can more than double the cost. If contracts ask for high limits, consider layered limits from more than one insurer.
- Turnover and fees – More revenue means more exposure. A firm billing £1 million usually pays more than one billing £100,000. Split income by activity, lower risk income can be rated cheaper.
- Claims history – Recent or frequent claims raise prices. A single paid claim can affect your renewal for years. Good risk management and early notification can reduce the impact.
- Contract terms – Uncapped liability or accepting fitness for purpose promises push up the price. Negotiating reasonable skill and care clauses and liability caps can keep premiums down.
- Jurisdiction and territory – US and Canada exposure increases both premium and excess. UK only work is cheaper. If you do worldwide work, be clear which law and courts apply.
- Staff and subcontractors – More people and the use of subs can raise risk. Insurers may ask that you hold contracts with subs and check their PI limits, for example matching yours.
- Risk controls – Peer review, documented scopes, change control and client sign off reduce claims. Show your processes on the proposal form to help the insurer rate you fairly.
Your profession – Design and advice that can cause large losses cost more, for example structural engineering. Lower risk activities, like pure training, are priced lower. Insurers rate based on historic claims and the severity of potential mistakes.
Every insurer prices risk differently. Compare multiple quotes and wordings to find value, not just the lowest price.
Ways to save on Professional Indemnity Insurance
There are smart ways to keep PI costs in check without cutting vital protection. Start with the right limit, then show insurers how you manage risk. Keep paperwork tight, and negotiate fair contract terms. Review cover each year as your work changes.
Small steps add up. Present your business clearly, compare quotes and review cover as your projects evolve.
Common Professional Indemnity Insurance questions
What does Professional Indemnity Insurance actually cover?
It covers your legal defence and compensation if your advice, design or service causes a client a financial loss. Typical inclusions are negligence, breach of confidentiality, unintentional IP infringement and defamation. It is claims made, so it responds to claims first made and reported during the policy period, subject to your retroactive date.
Do I legally need Professional Indemnity Insurance in the UK?
Not all professions must have it by law. Many regulators and memberships require minimum limits, for example architects and accountants. Even when it is not mandatory, clients often make it a contract condition, usually at £1 million or higher, so you need it to win work.
How much Professional Indemnity cover do I need?
Start with your biggest project and the worst case loss if advice goes wrong. Many SMEs pick £1 million to £2 million. Public sector and enterprise clients often require £5 million. Consider layered limits if you need higher protection at a sensible cost.
What is a retroactive date on a PI policy?
It is the date from which your past work is covered. Claims made policies only cover claims first made and reported during the policy term, for work done on or after the retroactive date. Ask for an unlimited retroactive date if you have continuous cover, so older projects are included.
What is run off cover in Professional Indemnity Insurance?
Run off keeps protection after you stop trading, sell or retire. Claims can arise years later. Many professionals keep run off for six years, in line with common limitation periods, and some hold it longer when contracts require it.
Does Professional Indemnity Insurance cover breach of contract?
Some policies cover unintentional breaches linked to a failure to exercise reasonable skill and care. Pure contractual promises, like guaranteed outcomes, are often excluded. Share key clauses with your broker so the policy aligns with your contract risk.
How does the excess work on PI insurance?
The excess is the first part you pay towards a claim. It often applies to damages, but not always to defence costs. Check your schedule. Picking a higher excess can lower the price, but make sure the amount is affordable if you need to claim.
Are subcontractors covered under my Professional Indemnity Insurance?
Many policies cover your legal liability for subcontracted work, if the claim arises from your services. Insurers usually expect you to contract with subs and ensure they hold their own PI at matching limits. Tell the insurer how you use subs, so the policy reflects reality.