Licensed professionals, consultants, and service providers are primarily meant to solve client problems. However, when it's your work that leads to a problem (or makes things worse), what then? Mistakes are normal, no matter the industry and the location. Despite the best efforts and intentions of a person, there will be times when things won't go as planned.
As society becomes more and more litigious, it's vital to stay protected from the financial fallout of an employee's actions or your own work if a client ends up with a loss because of it. When a burned client looks into legal action, it makes for really expensive legal costs—and that's the best-case scenario.
Enter professional indemnity insurance, which is a key way to protect businesses.
Professional Indemnity Insurance: What Is It?
Professionals like a plumber, an electrician, or a lawyer must carry a policy that covers them if they harm someone or their property. The insurance covers the cost of any claims as well as the cost of defending any court cases that follow. Any and all expenses related to public relations also become part of this coverage.
Put simply, if the third party (a client) alleges that the professional or one of the employees of a business gave advice or did work that led to a loss, the costs can be managed better with the help of professional indemnity insurance.
Is Professional Indemnity Insurance Necessary?
In certain professions, professional indemnity insurance is required. This includes the likes of:
Accountants
Architects
Financial advisors
Lawyers
Medical practitioners (like dentists, doctors and surgeons)
Real estate agents
Tax agents
Beyond that, there is no existing statutory requirement for professional indemnity insurance to be carried out in Australia. Requirements vary by state, so it's key to have an insurance advisor that can help provide relevant information.
It's not uncommon for professional indemnity insurance to be a condition for membership in peak professional bodies. Certain professional associations, collective organisations, or clients will likely require businesses to have professional indemnity insurance.
Professional Indemnity Insurance: What Kind Of Claims Does It Cover?
Each policy is unique to the industry, company and particular risk profile. Overall, professional indemnity insurance covers claims that stem from:
Breach of duty
Consumer law breaches
Contract breaches
Damages for dishonest or negligent behaviour
Defamation
Loss of documents
Slander
Carrying professional indemnity insurance is an excellent choice because there's a whole range of possible cases where a company has risk exposure. This intensifies with businesses that offer training and teaching, provide advice to clients, or create schemes, drafts, drawings, or designs.
At that point, the work exposes the business to risk daily. Professional indemnity insurance is a safety net that's affordable and provides financial protection alongside peace of mind. They can usually be tailored, depending on risk profile and requirements, to meet the needs of a business.
Conclusion
Professional indemnity insurance is great protection for businesses. Some professions actually require it, such as medical practitioners and accountants. It's a great way to address costs associated with third-party (client) claims that services led them to a loss.
In need of professional indemnity insurance on the Gold Coast? Check out New Wave Insurance today! We aim to connect all of our clients with the proper insurance for their business, vehicles and assets.