What professional indemnity covers
Professional indemnity (PI) insurance protects businesses that sell expertise. If a client claims your advice, design, code, report or professional service caused them financial loss — through error, omission or alleged negligence — PI pays the legal costs of defending the claim and any settlement or award.
The defence element matters as much as the payout: even a claim with no merit can cost tens of thousands to defend, and PI picks that up from the first letter.
Who needs it?
Three groups. Regulated professions — solicitors, accountants, financial advisers, architects, surveyors — must carry PI at levels their regulator sets. Contractors and consultants — IT, engineering, management, marketing — usually find clients demand PI in the contract before work starts. And anyone whose output clients rely on — designers, trainers, recruiters — carries real exposure even where nobody demands cover.
How much cover do you need?
Start with what's imposed: your regulator's minimum, or the level named in client contracts (£1m and £2m are common demands; larger clients ask for £5m). Beyond that, think about the largest financial loss a mistake in your work could plausibly cause a client — a flawed design on a large project dwarfs the fee you charged for it. Cover is priced on your profession, turnover and claims history.
The 'claims made' catch
PI policies work on a claims-made basis: the policy that responds is the one in force when the claim is made, not when the work was done. Two practical consequences: keep cover continuous (a gap leaves old work unprotected), and when you retire or close the business, buy run-off cover so claims about past work remain insured. Cancelling PI the day you stop trading is the classic expensive mistake.
What it doesn't cover
PI is about financial loss from your professional work. Injury and property damage belong to public liability; faulty physical products to product liability; dishonesty and deliberate wrongdoing are excluded everywhere. Check whether your policy covers breach of contract claims and loss of documents/data — wordings differ.
Getting the right policy
Match the limit to contracts and regulator rules, keep cover continuous, and have the wording checked against your actual services — a broker does all three and prices across insurers. See best professional indemnity options, or find a business insurance specialist through Nesto — free, no obligation.