In business, small mistakes can cause big problems. That’s why indemnity insurance is crucial for certain types of companies, freelancers and contractors who offer professional services.
Professional indemnity insurance (PII) provides protection against claims by clients of negligence, libel or slander, breach of confidentiality, and breach of copyright.
Compensation for a client’s financial loss may involve substantial amounts. So indemnity insurance premiums can be expensive, whether you get your coverage direct from an insurer, through a broker, or via a comparison website.
As a result, many businesses and individuals need to find payment options to ease this financial burden.
What’s the easiest way to pay for PII?
In most cases, you’ll need to pay the whole PII premium before an insurer will confirm cover.
You could do this by debit card, bank transfer, or cheque. However, you can spread the cost by getting the required amount from a business finance provider and paying them back in instalments over the term of the policy.
This allows you to free up cash flow and use working capital to cover other business expenses.
Other benefits of PII financing typically include:
- Flexible repayment terms
- Fixed costs and interest rates
- Dedicated account manager
- Easily renewable financing, ensuring you’re always covered
If you apply online for your professional indemnity insurance financing, you can typically get the deal finalised within 24 hours, with a competitive rate of interest.
How PII works
Professional indemnity insurance provides solid business protection and valuable peace of mind.
It will pay for a specialist lawyer to defend you, and meet the cost of any compensation or damages you have to pay.
PII protects you against claims by clients or third parties for damage or loss caused by your services or advice.
- Professional negligence such as wrong advice.
- Defamation – libel or slander against your client.
- Breach of confidence – sharing sensitive information without permission.
- Breach of copyright, trademarks, or intellectual property.
- Losing or damaging documents in your care.
Compensation claims can be brought against you even if you offered advice or provided a service for free.
PII is claims-made insurance, and it’s important to understand the potential consequences of this.
What is claims-made insurance?
Professional indemnity is a claims-made type of insurance. For a claim against you to be covered, your policy has to be in force at two points:
- When the claim is made.
- When you did the work.
This means that if you get short-term professional indemnity insurance for the duration of a particular contract, you’re only covered for the time the policy is active.
If the client sues you after the contract is completed, you’ll have no protection. And this could end up costing you far more than having long-term indemnity insurance.
This makes it highly advisable to take out a long-term policy and get run-off indemnity insurance to cover you for any new claims brought against you after your PII has expired if you change professions or retire.
If you change insurer, you may also need a run-off policy, although your new insurer may agree to cover you for the time you were with your previous insurer.
New claims can be made against you for up to six years after an alleged negligent act,
Who needs PII?
According to the Association of British Insurers (ABI), you should consider taking out professional indemnity insurance if you offer clients consultancy services or skilled work either as a company or a self-employed individual.
PII isn’t a legal obligation but clients often expect a professional service provider to have it. And PII is required by regulators and professional associations overseeing professionals such as:
- Financial advisers
- Chartered surveyors
- Some healthcare providers
Many other businesses get professional indemnity insurance, including:
- Advertising agencies
- Design agencies
- Public relations agencies
How much does PII cost?
Professional indemnity insurance can be one of the largest business insurance costs – more than a thousand pounds a year for some types of professionals in small businesses.
The price of professional indemnity insurance depends on how much cover you need and how much of a risk your business might be.
Calculating PII premiums is a complex process. It uses a significant amount of information to come up with a figure that accurately reflects the risk.
Premium calculation considerations include:
- Type of work done by the company.
- Annual revenue.
- Number of partners, directors and staff.
- Claims history of the business.
If you are considering purchasing PII but worried about the cost, Contact V4B Business Finance today to discuss our financing options.