Professional Indemnity Insurance – What You Need to Know

Architects and Creatives Professional Indemnity Insurance – What You Need to Know

We know that professional indemnity insurance is not the sexiest topic, but it really is important, so here are a few things you need to know…  

Professional Indemnity Insurance is critical for anyone who offers either professional advice or services to both businesses and individuals, and can provide cover should you offer incorrect advice that leads to financial losses. Legal costs can often mount up very quickly and a professional indemnity policy can assist in cases where you may have been accused of providing incorrect advice despite not actually doing so.

Now that we know why you need it, here are some useful pointers and some of the things you should look out for when choosing a policy:

• Your Indemnity Limit – This is essentially the amount of insurance you have or the limit to which the policy will pay up to. When choosing your limit it is important to think about what the maximum claim against you could be, and remember this is often more than the amount you are paid for the work you do. For example, let’s say you’re an architect and you design a small extension for a fee of £3,500 which requires a significant structural alteration to the existing building. Unfortunately, some of the calculations are out and the existing structure maintains damage – what might that cost to fix? Only you know what indemnity limit is right for you but do make sure you consider any contractual requirements or potential liabilities that you could incur. At ipro we offer limits from £100k all the way up to £5m and everything in between.

• Retroactive Cover – Professional Indemnity insurance is a bit different to most conventional insurance products in that it is provided on what is known as ‘a claims made basis’. This means that the policy only responds to claims or circumstances that are notified during the policy period, irrespective of when they occurred. For example, if you undertook work for a client last year but were only made aware of the potential for a claim against you now, it would be your current insurer who would consider it, rather than any previous insurer. As a result of this you will have what is known as a retroactive date which is the date to when the policy will respond from, and is often your company formation date. Unlike a number of our competitors, ipro automatically provides full retroactive cover all the way back to the date you confirm your company was formed. Your retroactive date really is crucial, if your policy does not provide retroactive cover then it is essentially useless for any work you have done in a previous policy period, even if you had insurance at the time.

• Your Insurer – in an uncertain world, it is more important than ever to choose a financially stable insurer. Before taking out a policy it would be prudent to check who is actually providing the insurance and whether they are rated by Standard and Poors or AM Best etc. At ipro, all of our policies are underwritten by Axa, one of the largest insurers in the world, who are A-rated by the major credit reference agencies.