What Does Professional Indemnity Insurance Cover?

What's actually covered under a PI insurance policy?

Professional indemnity insurance covers: damages and compensation awarded against you for professional negligence, legal defence costs (barristers, solicitors, expert witnesses), court fees and procedural costs, investigation and expert costs to determine the claim's merit, settlement negotiation costs, and sometimes interest on damages. Essentially, if a client can prove your professional error caused them financial loss, your insurer pays for the claim and defence. This includes errors in judgment, failures to act, inadequate advice, breach of duty, and negligent misrepresentation. The policy is designed to cover you completely so you can focus on business rather than worrying about legal bankruptcy.

What are the most common exclusions in PI insurance?

Standard exclusions include: claims from dishonest or criminal conduct (fraud, theft), deliberately knowingly giving false advice, claims the insured knew about before the policy started, work done before the policy start date (though run-off cover addresses this), claims from contractual warranties beyond professional standard of care, punitive or exemplary damages (UK courts rarely award these anyway), and statutory fines or regulatory penalties. Many policies also exclude: work in certain high-risk jurisdictions, certain specialisms (check if your area is covered), claims from other professionals' errors (unless you're jointly liable), and work done without proper authority or license. Read your policy exclusions carefully--they're crucial.

What are real examples of covered claims?

An accountant miscalculates a client's corporation tax return, resulting in a GBP85,000 penalty; PI insurance covers the client's loss. An architect's design is structurally deficient; when repairs cost GBP200,000, PI insurance covers it. A solicitor misses a critical deadline, losing a case worth GBP150,000 to the client; PI covers the lost value. An IT consultant's security advice proves inadequate; when the client suffers a data breach costing GBP300,000, PI covers it. A copywriter writes product claims that breach advertising standards; the client faces GBP50,000 in fines and reputational costs; PI covers it. A surveyor fails to identify subsidence; the buyer discovers it later and sues; PI covers repairs and losses. These are everyday claims that professional errors create. Insurance makes the difference between disaster and managed resolution.

"The difference between a covered claim and an excluded one often comes down to reading your policy carefully before you need it. That's when most professionals discover what they're actually covered for--and sometimes what they're not."

- Claims director, insurance firm

Frequently Asked Questions