Why professional indemnity insurance is important

This article is provided by Simply Business

When you hear about professional indemnity insurance, it’s usually in relation to lawyers, accountants, financial advisors and other similar professions. But professional indemnity insurance can be crucial for those working in construction, too.

What is professional indemnity insurance?

Professional indemnity insurance is a cover that can help protect you if someone suffers a financial loss because of a mistake you’ve made in your work.

The type of mistakes it can provide cover for include negligence, unintentional breaches of confidentiality or copyright, and loss of documents or data.

But what does that look like in the real world? Unfortunately, there are a number of ways you can accidentally cause someone a financial loss. Say you misread or misquoted some measurements. At best someone might end up cutting some lengths of wood to the wrong size, for example. They might make a small loss on that, which your professional indemnity could cover. 

However, on the other end of the spectrum, the building you’re working on could end up with serious structural damage because of your mistake. In either instance you could find yourself taken to court.

What does professional indemnity insurance cover?

In cases like the above, you could find yourself in serious financial difficulty without professional indemnity insurance in place. 

This cover can step in to help pay legal fees should someone decide to take you to court over your mistake, as well as compensation that you may be ordered to pay.

The amount your insurance can pay out will depend on the level of cover you have in place. The compensation payment will usually take into account the financial loss that the client has suffered, so if an entire building needs to be rebuilt because of your mistake, the payout will be a lot higher than for something smaller.

Is professional indemnity insurance compulsory? 

Professional indemnity insurance isn’t mandatory under UK law, but some regulators and professional bodies will require you to have it in place. 

While this is unusual for those working in construction, it’s not unheard of for certain contracts to insist you have professional indemnity insurance before you begin work. Make sure you check if it’s required when signing any new contracts or joining any professional organisations.

If you’re thinking about adding professional indemnity to your other insurance covers, keep in mind that you may not need to take out individual policies for each of these covers. Providers like Simply Business allow you to pick and mix the covers that you want to create a tailored policy, with one premium and one renewal date.

This article is provided by Simply Business