Indemnity

Considering Professional Indemnity insurance

There are quite a few things to think about when choosing a policy, and it’s not the case that cheapest is always best.

Scope

Some policies only cover you for work in the UK. Others will have scope that is Worldwide but will normally exclude the United States and Canada. If you’re operating in those areas you may need additional cover, as the size of claims in those countries can be substantial.

Run-off cover

The time between you carrying out work and a client deciding to make a claim can be considerable. What isn’t immediately clear is that you need to be covered both at the time you did the work, and at the time the claim is made.

‘Run-off’ is when you no longer need to be covered for new work, but you still need professional indemnity cover for claims in the future.

If you’re retiring or shutting down the business and want to cancel a policy, you will need “run off” cover for a period of time afterwards.

The length of time depends on your business and you should take advice on what is suitable for you and your situation.

Also, if you’re changing policies you will either need run-off from your original provider, or your new broker needs to agree to accept new claims for prior incidents.

Again, you should take advice before switching to make sure you remain covered for all work done in the past.

Retro-active cover

Some insurers promise ‘retro-active’ cover for businesses that weren’t previously insured, which can be useful.

That means that today you can buy cover for work done in the past, in some cases right back to when the company was founded.

This retro-active cover obviously comes at a cost, but the peace of mind it provides may well be worth it.

If you already have a claim against you by a customer, retro-active cover is unlikely to available. Therefore, it’s best to get cover before you really ‘need it’.