What is professional indemnity insurance and who needs it?
Professional indemnity (PI) insurance covers claims arising from the advice or services you provide — errors, omissions, negligence, or work that fails to meet the expected standard. It also covers the legal costs of defending such a claim, which frequently exceed the compensation.
How it differs from public liability. Public liability covers physical injury or property damage caused by your activities. PI covers financial loss caused by your professional work. An architect whose design causes a building to fail, an accountant whose error triggers a tax penalty, a consultant whose recommendation loses a client money — none of that is public liability.
What it typically covers: professional negligence, breach of professional duty, errors and omissions, loss of documents or data, defamation arising from work, and unintentional breach of confidentiality or intellectual property.
Who needs it:
Anyone giving advice or providing expertise for money — consultants, accountants, solicitors, architects, engineers, surveyors, IT contractors, designers, marketing agencies, recruiters, coaches, therapists.
Where it is mandatory. Several regulated professions must hold it: solicitors, accountants, architects, surveyors, financial advisers, healthcare professionals and others, with minimum limits set by the regulator.
Where it is contractually required, which is increasingly common — most corporate and public sector clients will not engage a supplier without it, often specifying a minimum limit of £1m or more.
The single most important feature to understand: PI is written on a "claims made" basis.
This means the policy must be in force when the claim is made, not when the work was done. A policy that covered you while you did the work does not respond to a claim made after it lapses.
Two consequences follow:
Retroactive date. The policy covers past work only back to a stated date, so continuity matters when switching insurers.
Run-off cover. When you stop trading or retire, you must buy run-off to cover claims arising later — professional claims frequently emerge years after the work.