Do I need Professional Indemnity Insurance cover?

As a professional, it’s can be a great idea to have Professional Indemnity Insurance in place to protect you and your business against claims made by a third party for malpractice or professional misconduct. This can happen with more frequency than you might think.

Before you begin offering advice as part of your professional services, it’s a wise idea to check whether your industry professional body or regulator requires you to hold Professional Indemnity (PI) cover. Some professions in New Zealand, like accountants, real estate agents and architects, have a mandatory industry requirement for a professional to have a PI policy.

You’ve no doubt put in the hard yards in to become great at what you do, from completing required studies to building up a loyal client base, eventuating to the opening of your own small business. But all it takes is one allegation from a client, regardless of whether you’re at fault or not, to heap a mass of bills on your shoulders. These include court costs, damages, and even lost work, and have the potential to financially cripple your business and in a worst-case scenario, force you to shut up shop forever. If you are a sole trader, you might be personally liable for these costs, which can be a scary thought.
There are many reasons which could result in a claim being made against your business, including:

• Failure to deliver on promised services
• Negligence in executing your professional services
• Delivering incomplete, careless or incorrect work
• Making mistakes, oversights or accidental omissions
• A client misinterpreting advice that you have given them, resulting in them suffering a financial loss

Protecting your back pocket and reputation

Whether prepared for it or not, a claim must be defended – ignoring it won’t make it go away. Defending a claim is a costly and time-consuming process.
Don’t despair. Professional Indemnity insurance is your best defense when faced with a professional Indemnity claim. You get the assistance of an expert insurer by your side to protect your finances and safeguard your reputation, as well as providing peace of mind knowing you’ll still have a business when it’s all over. BizCover has multiple Professional Indemnity options from numerous insurers, so you can be rest assured that there will be an ideal insurance product for you and your business.
What does Professional Indemnity Insurance cover?
Professional Indemnity insurance typically foots the bill for things like:

• Legal and defence costs
• Related claims investigation costs including those by a professional body
• Court attendance costs
• Compensation costs awarded to the claimant
• Public Relations costs

Did you know?

In many instances, the costs of defending a claim far outweigh the costs of the actual compensation awarded, particularly for cases that take several months or years to defend. In these cases, you’ll be glad to have the right Professional indemnity insurance footing the bill, allowing you to get back to doing what you do best – running your business!
Another side effect of many claims is damage to your professional reputation. As a professional who dispenses advice or performs a specialised service, you are often hired on the strength of your good name. Even if the claims tun out to be false, an ongoing legal dispute could cause significant damage to your reputation, driving clients away, dramatically impacting your bottom line. Fortunately, Professional Indemnity insurance may even pay the PR costs for some damage control for your company and your reputation.