You might already hold Professional Indemnity Insurance (PI), and renew your cover year after year without a second thought, but there’s more to your PI cover than you might think. Because of the way Professional Indemnity policies operate, there are some aspects of the cover that are worth keeping in mind to ensure your policy is providing you with the protection you need.
Your cover shouldn’t end after you stop practising
With most of your other insurances, the cover often isn’t needed anymore after you no longer have the asset. For example, you might cancel your car insurance after you sell your car. With PI however, if you retire, or simply decide to stop practising, you should consider keeping your cover in place. The cover that stays in place after you’re no longer in business is known as ‘run-off’ cover.
Run-off cover is a feature under PI that continues to cover you for professional indemnity claims even after you’re no longer in business or practising. This is important for a few reasons. Firstly, when you’re involved in giving advice, the advice can have long-lasting implications, so claims of professional negligence might come about many years after the advice is given.
PI is a ‘claims-made’ policy, in other words, the policy needs to be in place at the time a claim is made for it to be covered. Suppose you provide a client with advice today, only for them to allege a few years down the track that your advice led to them suffering a financial loss, and they take legal action against you.
In this case, for the claim to be covered under your Professional Indemnity Insurance, the policy needs to be in place at the time the claim is made. It is not enough that the policy was in place when the advice was given. Remember, run-off cover is not automatically included under PI – it needs to be applied for, and an additional premium may apply for it to be effective. Your broker can advise you whether an additional premium applies or not.
Your coverage can (and should) start before your policy starts
We’ve explained the concept of ‘claims-made’ and ‘run-off cover’, but an equally important feature under PI is retroactive cover. Just as you may need to keep cover in place after you’re no longer practising, it’s also important to ensure your policy will cover you for claims that arise from advice given in the past (usually, from when you started practising).
This is why PI policies usually have a retroactive date. Preferably, the retroactive date would be the date you started practising to ensure any claims arising from a client you serviced previously can still be covered under your policy. However, not all insurance policies are created equal, some policies may default your retroactive date to the date the policy starts, which could leave you with a significant gap in cover.
It’s also worth keeping in mind that for retroactive cover to be applicable, you must not have known about the claim or a circumstance that may lead to a claim.
You might need to contact your broker before a claim is made
If you need to make a claim, for most insurance policies, you simply need to contact your insurance broker or insurer at the time you’re ready to make the claim. However, under Professional Indemnity, it is not enough to do this. You are required to notify your insurance broker as soon as you become aware of a claim/allegation, or a circumstance that may lead to a claim.
Even a subtle warning sign such as a client mentioning they’re not fully happy with the advice or service you’ve provided; a verbal threat they will take legal action or make a complaint, and even correspondence from someone stating that they were not happy with the services you provided, should prompt you to contact your broker. If you do not notify your broker of a concern of possible legal action or circumstance that could lead to a claim, it could result in you being uninsured if a claim was to result at a later date.
Importance of understanding your cover
It’s probably clear by now that when it comes to Professional Indemnity Insurance, there is more than meets the eye in terms of coverage. It’s a good idea to take the time to understand the various features under PI, and be sure you have the level of protection you’re comfortable with. Speaking to a broker who understands the risks of your industry in detail can also be a valuable exercise in making sure you’ve ticked all the boxes regarding your PI cover.