Five Types of Professional Liability Insurance to Consider
In your business, do you offer skills, knowledge, or advice to clients or handle sensitive data in the course of your work? Professional liability insurance is the safety net you need if a client claims your business activities caused them financial or physical harm. We’re here to educate you about the various types of professional liability insurance so that you can safeguard your business and its reputation.
What is professional liability insurance?
Also known as professional indemnity insurance, professional liability insurance is a policy that deals with claims of professional negligence. A client, customer, or patient can claim financial compensation if they believe that a service you provided, advice you gave, something you or an employee said about them, or the way you handled their sensitive data caused them harm.
This policy helps you legally defend the claim and deals with any compensation costs if you are found liable for professional negligence.
Different types of professional liability
There are several different types of indemnity insurance, and although they mainly cover risks of a similar nature, some offer more specialised protection related to a specific professional field. Indemnity insurance examples include:
- General professional indemnity insurance - This covers a wide variety of businesses against the most common types of professional negligence, including bad advice, poor work standards, errors, omissions, and breaches of standards, regulations, or professional duties.
- Specialist professional liability insurance - This provides niche cover for professions that need a tailored policy. A typical example is medical malpractice, but you can also find policies tailored for accountants, architects, and legal professionals.
- Management professional liability insurance - This serves to explicitly protect the assets of directors and officers in the event claims are made regarding their professional actions.
- Environmental professional liability insurance - Consider this type of professional liability insurance if any of the decisions or actions your business takes could cause environmental damage.
- Cyber professional liability insurance - This directly addresses cyber issues such as hacking, cyber-attacks, and data breaches, where the actions of your business are deemed as a contributory factor.
Who needs professional indemnity insurance?
Certain professional bodies require their members to hold a set level of professional indemnity insurance, including:
- Accountants and financial advisors
- Architects
- Business advisors
- Chartered surveyors
- Coaches, educators, and trainers
- Construction workers/tradespeople
- Designers
- Engineers
- Medical professionals
- Solicitors
Why do they need it? A financial advisor who gives inappropriate investment or financial planning advice could end up losing their clients a significant amount of money. Or, what about the architect whose small error on their drawing translates to a costly structural issue once the building is under construction?
Some mistakes have more serious consequences than others. A trainer could give bad advice that causes an injury and leaves their client unable to work for months. For medical professionals, a misdiagnosis, a surgical error, or the administration of the wrong dose of a medication could have life-changing or even fatal outcomes. The NHS and private medical companies, therefore, require medics to hold this type of indemnity insurance.
Could your work or data handling benefit from professional liability insurance? Examples of other businesses that may need this cover include:
- Consultants and consultancy agencies
- Graphic designer
- Health and wellness professionals
- IT Contractors
- Marketing and PR agencies
- Software developer
- Web designer
A graphic designer could feel the heat if a large brand accuses them of infringing the copyright of their logo, and marketing agencies could face claims for financial losses if their latest strategy ends up costing their clients money.
What is covered by professional liability insurance?
This type of professional liability insurance policy consists of several useful covers that protect your business finances and reputation, such as:
- Professional negligence – to cover mistakes, omissions, or poor advice that impact your client’s finances or reputation.
- Breaches of confidentiality – such as infringing copyrighted material, intellectual property rights, or trademarks and sharing client information without their permission.
- Defamation – should a client accuse you of libel or slander.
- Loss of information – which can include the physical or digital loss of documents or data.
- Bodily injury - should someone be hurt due to an error in your design or construction or due to poor advice.
What isn’t covered by professional indemnity insurance?
Understanding what you aren't protected against is just as important as knowing what is safeguarded. Your policy may not protect you against claims made by your own employees (though their own negligent actions should be covered).
You are typically only covered for claims that are made and that occurred while a policy was in effect. This means if a client makes a claim once your policy has expired, you may not be covered. Run-off cover is the simplest solution to this issue, as it ensures the insurer who covered you when the incident occurred will deal with any claims that arise after the policy has ended.
If your business actions cause injury or property damage to a member of the public, this will not be covered by professional indemnity insurance; instead, you would need public liability insurance.
FAQs
How much does it cost, and what level of coverage do I need?
The level of cover you take out is one of the major contributing factors to the cost of your premium. Different types of indemnity insurance require different levels of coverage, depending on the risks you face. Generally, professionals with a governing body must hold between £2 million and £5 million, although medical professionals may require more. Other factors that affect your premium include your profession, the size of your business, and your location.
Is professional indemnity insurance compulsory?
Although it isn’t a legal requirement, certain professions need it to be accepted into their governing bodies.
When should I obtain professional liability insurance?
Businesses tend to benefit from annual policies to cover all their work throughout the year. If you freelance part-time, you may prefer to take out a short-term policy to cover the period of your work project – but remember to include a run-off policy in case your client makes a claim at a later date.
Park Insurance has been working with British businesses for over 30 years. We can help you find the right type of professional liability insurance that offers peace of mind as you work with your clients. Get in touch today and see how our bespoke approach to insurance can support your business.