What Is Professional Indemnity Insurance?
When starting up your own business, there are a multitude of things you are told
to consider and its not always immediately apparent what they all mean. Professional indemnity insurance is one of those things; from the name alone, its almost impossible to tell what it is or how it differs from any other kind of insurance. Below is a guide to professional indemnity insurance, covering what it is, how it helps and how much of it you need.In the hugely complicated world of running a business, in which myriad things can go awry, there are few things worse than a simple mistake causing a long-lasting negative impact on both your company and yourself. Professional indemnity insurance is a specific kind of insurance that protects your business from claims by dissatisfied customers, which may otherwise damage your reputation and devastate your finances. This includes accidental loss of clients information or money, unintentional infringement of copyrights or trademarks and cases of negligence. Although all businesses have a duty of care towards their clients and most try to fulfil their obligations, mistakes can and do happen, so its always best to be prepared.
Professional indemnity insurance protects you against claims made by unhappy customers in a number of ways. Should you make a mistake in your professional services, it covers the cost of correcting the situation, to minimise the chances of larger claims being made against you. By acting quickly, simple mistakes can be resolved with a minimum of damage to your finances and reputation. However, should a more serious claim be made against you, professional indemnity insurance also covers your legal costs, as well as any damages for which you may become liable, with the amount of protection depending on how much insurance you purchase. Many insurance providers will also argue your case for you, no matter how far into the legal system you may find yourself, in an attempt to win your case and avoid any damages being awarded at all.
Lastly, decent professional indemnity insurance will also protect you if an employee is involved in the theft of clients money, or the loss or damage of information, documents or items left in your care. It is never pleasant having you business sued because somebody else has made a mistake; ensuring you have adequate protection is vital to prevent small mistakes having dire consequences.
When it comes to investing in professional indemnity insurance, always use an insurer with experience in your industry who offers direct access to their advisors. Their legal team should have a proven track record and experience in dealing with the cases you are most likely to experience. However, there is no fixed amount of professional indemnity insurance businesses are recommended to buy ; no single amount of cover will be appropriate for every company, since different businesses and industries carry different levels of risk and areas in which they require more or less protection. Within some industries, clients will demand a certain amount of indemnity before even considering offering you work; the more a client stands to lose if you make a mistake, the more insurance they will expect you to have before they use your services. The most sensible thing to do is invest in as much insurance as you reasonably can because, in this day and age, clients will always find something to claim for, no matter how hard you try.
Finally, if you now wish you had already invested in professional indemnity insurance, you may be pleased to read that some companies offer retroactive policies, which cover work that has already been completed, in case problems caused by this work arise in the future.
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