Professional indemnity insurance for businesses

Professional indemnity (PI) insurance covers you when a client or someone else claims that your professional work was negligent and caused them a loss. It is for businesses that give advice, produce designs or provide a professional service, where a mistake costs the client money rather than causing an injury.

It does not cover injury to people or damage to their property, which is what public liability insurance is for. Injury or illness your own employees suffer at work falls under employers' liability insurance, which most employers must have by law from the day they take someone on.

When you must have it

Whether you need PI insurance depends on your profession. Some regulators make it a condition of practising and set the minimum cover and policy terms.

If your regulator requires cover, its rules decide what counts, so check them before you buy. If you are not regulated, check your client contracts and any tenders you bid for, which may set a minimum level of cover.

How claims-made cover works

PI policies are written on a claims-made basis. The policy that pays is the one in force when the claim is made, not the one you had when you did the work. A claim made in 2026 about work you did in 2022 is dealt with under your 2026 policy.

This has three consequences:

• If your cover lapses and a claim arrives during the gap, no policy pays it, even for work you did while insured.
• When you change insurer, check that the new policy covers claims about work you did before it started.
• Tell your insurer as soon as you learn of something that could lead to a claim. A claim that later arises from circumstances you notified is then covered by the policy you notified under.

Cover after you stop working

Clients can claim for years after the work was done, so stopping work does not stop the risk. Run-off cover pays claims made after you retire, close or sell the business, for work done while you were trading. Arrange it before you stop.

Some regulators set run-off rules. Solicitors' policies must include six years of run-off cover. Architects are expected to keep at least six years of run-off at the same level as their last year of practice.

How long a client has to bring a claim depends on where the work was done and the type of claim.

Choosing between the two types of limit

The limit of indemnity is the most the insurer will pay. It can apply in one of two ways, and the difference matters if you face more than one claim in a year:

• An each and every claim limit applies in full to every claim.
• An aggregate limit is the total the policy pays for all claims in the policy year.

Set your limit by the largest loss a mistake in your work could cause a client, and never below what your regulator or your contracts require.

Next steps

• Check whether your regulator or professional body requires PI cover, and what minimum terms it sets.
• Check your client contracts for the cover they require.
• Before you renew or change policy, confirm it covers claims about your past work.
• Before you retire or close the business, arrange run-off cover.