There’s much more to professional indemnity insurance (PI) than meets the eye.

This type of insurance helps cover the cost of legal action for losses others experience resulting from your services including professional advice. For example, it could cover contract breaches, such as:

Not achieving the results of a contract (completing a report on time)
Giving negligent advice, such as poor financial or dietary advice.
It can also cover mistakes when providing a service, including medical malpractice, poor legal advice, or inadequately auditing a company’s accounts. PI cover is mandatory for some professions or part of a membership of a professional association.

The article unpacks five common misconceptions about the protection PI offers (or not, as is often the case).

1. You don’t have to work in a ‘traditional’ profession to take advantage

PI insurance isn’t just for doctors, lawyers and accountants. Anyone who offers advice as part of their business should consider if they need protection from litigation. Here’s a range of professions and trades that could benefit from PI:

Plumbers
Builders
Mortgage brokers
Engineers
Project managers
Marketing and communications specialists.
2. You could also be sued for not giving advice

As a practitioner in your field, you could be sued for not offering advice that’s reasonably expected. Think of a doctor who dismisses your health complaints and doesn’t refer you for further tests such as a biopsy or scan. That could be considered negligent if you developed a serious illness that could have been treated or stopped in its tracks. You’d expect them to deliver a duty of care as a health professional.

3. PI Insurance is offered on a claims-made basis

You can’t take out PI insurance after you’ve become aware of a claim or a potential claim or become aware of circumstances that could lead to a claim.

Once you take out such cover, you’re obligated to tell us as soon as you know there’s a risk of a potential claim. Not keeping us in the loop could mean the insurer denies your claim. We’re not expecting you to assess the degree of risk, so if you’re in doubt, notify us anyway.

4. Cover shouldn’t end when you stop practising

When you stop operating your business, you shouldn’t cancel your PI policy. There’s a useful option called ‘run-off’ cover that will protect you against PI claims when you’re no longer practising or in business. This is because your advice may have long-lasting implications and, therefore, risks.

For example, building certifiers who retire or leave the profession often opt to secure run-off insurance for 10 years thereafter. In NSW, for example, Fair Trading recommends this, though it’s not mandatory.

5. Your cover can start before your policy

Importantly, your policy will often have a retroactive date to reflect when you started practising, but it pays to check it’s not the date you took the policy out. This is where policies can differ. For example, as a startup business, you might not have been able to afford PI insurance initially, so there could be a gap between when you started operating and the policy start date.

For the retroactive cover to apply, you mustn’t have known about the circumstance that leads to a claim or the claim itself.

Overall, professional indemnity cover can be complex. Once you begin comparing policies, you’ll find many variations in what they cover. Let us guide you on which cover is the best fit for your unique business.

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