What is Professional Indemnity Insurance?

Professional Indemnity insurance (also known as PI insurance) is designed for professionals who provide advice or services to their customers and may even be a legal requirement for some professions. It can cover claims made against your business by customers or other third parties alleging that in performing your professional services, your business has caused them loss.

PI insurance can also help by providing cover for legal costs, settlements and court orders or judgments associated with claims against your business, provided they are covered by the policy.

Why do I need Professional Indemnity Insurance?

You probably wear many hats when running your office or practice. With the variety of tasks you have to tackle, you may feel like you are the marketing team, human resources team and maybe even the finance team for your business! With your job being so big, there may be instances where you make an error or omission in the service or advice you provide to a client after all you are only human.

If you receive a claim from a client alleging they have suffered financial loss (or other loss) due to your professional advice or services, the burden of legal costs and compensation can be a significant strain on your business. PI insurance can help to cover the costs associated with such claims. This can include compensation that is payable, and, depending on your policy, it can also include legal costs. Without insurance, you would need to pay the costs for any claims made against you out of your own pocket.

Here are some claims examples of Aon clients with Professional Indemnity Insurance to demonstrate how a PI policy works:

Claim Story: Jenny*

Jenny*, a massage therapist performed a massage on John*. John experienced an increase in pain immediately after the massage. He sued Jenny for compensation and rehab costs as he believed it was her massage technique that led to the increase in pain. John was successful in his claim against Jenny, and Jenny was required to pay John compensation. Jenny was also required to pay legal fees in defending herself. Professional Indemnity Insurance arranged for Jenny by Aon helped to cover the legal fees, as well as the compensation she had to pay.

Claim Story: Sam*

Sam* was an accountant who regularly prepared tax returns. In preparing Bruce’s* tax return, he made an incorrect tax deduction. This led to Bruce underpaying his tax for that year. Bruce eventually received a large fine from the tax office, and was also required to pay back the amount he’d underpaid. He successfully took legal action against Sam as it was his mistake that led to him receiving the fine and needing to backpay his tax. Sam held Professional Indemnity Insurance arranged through Aon, which helped cover the legal fees to defend his case, as well as the amount he was required to pay Bruce.

Don’t just insure, be sure

Business insurance can be complicated. What you think you’re paying for isn’t always what you get. As an insurance specialist, Aon helps you find a policy customised for the common risk of your industry so you’re more confident that you’ve found the right type of insurance for your business.

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Why Aon for Professional Indemnity Insurance?

Don't just insure, be sure.

Right type of cover

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We help you make claims and advocate on your behalf
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Manage your renewals easily
Adjust your policy anytime
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Assistance in complex claims

Rely on Aon’s industry experience for your Professional Indemnity Insurance

If you’re a small business owner, your job is anything but small. When it comes to protecting your business, it helps to have an expert on your side. At Aon, we want you to feel confident you’ve made a smart decision for your business insurance needs.

As SME insurance specialists, we understand the risks that businesses like yours face and how to insure against them. We know insurance policies and understand that the detail of your policy wording is critical to providing the type of cover your small business needs. That’s why we help you by arranging policies customised for the common risks of your industry.

You can compare covers and take out your policy online. Or you can speak with our team of Australian-based SME insurance experts, who are here to support you every step of the way. We’ll give you access to the relevant information required to help you understand the cover options available to you so you can feel more informed about your choice of insurance.

What does Professional Indemnity Insurance typically cover?

Claims investigation costs

Includes cover for the costs of investigating, defending and settling claims made against your business.¹

Public relations costs

Includes cover for the cost of a public relations consultant to help reduce damage to your reputation following a claim against your business.¹

Cover for contractors

PI policies can provide cover for claims relating to the performance of professional services by your consultants, contractors, subcontractors or agents, which you are legally liable for.¹

Public and products cover

Professional Indemnity Insurance can also include Public and Products Liability cover, which can help you to pay for costs or loss which you are required to pay where a third party suffers personal injury or property damage or loss caused by products that are sold or supplied through your business.¹

Retroactive and run off cover

PI Insurance can include cover for claims arising from acts, errors or omissions that are alleged to have happened before your insurance start date and can include cover which survives after you retire or leave the profession for acts, errors or omissions occurring before you retired or left the profession.¹

FAQs

Frequently Asked Questions

Here are some questions commonly asked by clients.

What is the difference between Professional Indemnity insurance and Public Liability insurance?

Professional Indemnity insurance provides cover for claims made against your business by third parties claiming that your professional services or advice caused them loss. Public Liability insurance covers the costs associated with a third party’s claim for personal injury or property damage or due to products that are sold or supplied through your business.

Who needs Professional Indemnity insurance in Australia?

Professional Indemnity insurance is a mandatory requirement for some professions in Australia, including some registered professions or as part of a professional membership. The level of PI insurance required varies by profession. Even if PI insurance is not mandatory for your profession, your clients may require it. Before some clients hire you, they may want to see proof of your PI insurance. This helps assure them that your business will be strong enough financially, to deal with a worst-case scenario.

Is Professional Indemnity insurance the same as Malpractice Insurance?

Coverage under these policies can be similar, but they’re designed for different professions. Medical Malpractice Insurance is designed specifically for healthcare professionals, hospitals and surgeries.

Explore more FAQs

Is Professional Indemnity insurance the same as “Errors and Omissions”?
Yes. Professional Indemnity Insurance is also known as Errors & Omissions in some parts of the world, including the United States.

What are the limits on Professional Indemnity insurance?
Limits in the amount of cover will depend on the level of insurance you’ve taken out and the needs and circumstances of your business. You can consult our team of specialist brokers to help understand the coverage options available for your business.

What does professional indemnity insurance not cover?
Every policy has exclusions, and you should read your policy wording and speak to your broker to fully understand the exclusions specific to your policy. Some of the types of claims which generally aren’t covered include claims which arise from your intentional damage, fraud & dishonesty, and where you have assumed the liability under a contract.

How much Professional Indemnity insurance do I need?
This will depend on a number of factors such as your profession, your business needs and the clients you work with. Some professions are required by law to hold a minimum level of cover, and some clients may require you to have a minimum level of cover to work for them. Most PI Insurance policies start at a minimum cover of $1 million, but you should decide the appropriate limit for you and consult with your broker about this if you need to.

What is retroactive cover?
Retroactive cover is protection for claims which are based on services or advice you provided before the start date of your current PI insurance policy. When taking out PI cover, you may be asked to nominate a retroactive cover date or the insurer may impose one.

What is run-off insurance?
Run-off insurance provides coverage for claims made against you after your business ceases operating, or after you retire, based on advice or services you provided whilst in business. Depending on the policy, you may be required to pay additional premium to activate run-off cover.

Are Professional Indemnity insurance policies issued on a claims-made or occurrence basis?
PI Insurance is written on a claims-made basis. This means it will only cover claims made while the policy is in force. The claims-made basis of PI insurance means it is very important that any circumstances which may give rise to a claim, or any claim itself, be notified to the insurer as soon as possible after they occur. For example, if a client complains to you about your advice, your insurer should be notified at that time, rather than wait until a formal claim is made. If that client does decide to take legal action against you at a later date, you may not be entitled to cover if the insurer wasn’t notified previously.

As a professional, what other types of Insurance might I need?
Depending on your profession, and the nature of the work you carry out, there are several different policies you may need to consider. For example, if you have an office and have clients visit you, you can take out Business Insurance to help cover the cost to repair your premises if your office is damaged by fire, storm or other event, as well as Public and Products Liability to help cover you if someone is injured on your property or by your products. Cyber Insurance also offers important protection, which can help protect your business against cyber threats and other internet-based risks.

What’s typically not covered under Professional Indemnity Insurance?
As with most insurances, there are some circumstances which are not intended to be covered by Professional Indemnity Insurance (PI Insurance). For example, PI Insurance will not cover liability arising out of wilful misconduct, criminal acts committed by you, or incorrect advice you knowingly and deliberately provided. Another common exclusion in a PI policy relates to contractual liability where you have not been negligent. For example, say you sign a contract with a client. Sometimes, contracts may stipulate that you accept responsibility for loss, regardless of whether you are at fault or not. In this instance, if you are held liable for damage which has not come about as a result of your advice or service, your PI policy is unlikely to cover this claim.
In addition, there are some events not covered by PI Insurance simply because they’re intended to be covered under other types of insurances. Some examples may include injuries to or allegations of negligence made by employees which are designed to be covered by Worker’s Compensation Insurance or Employment Practices Insurance. Furthermore, PI policies typically do not cover your liability for third-party personal injury or property damage as these events are traditionally covered under Public or Product Liability Insurance.
Put simply, a claim which does not involve an allegation of professional negligence against you will not usually be covered by Professional Indemnity Insurance. It’s also important to note that events that are and aren’t covered under PI will also depend on your profession.