What is Professional Indemnity Insurance?

When you decide to open a business you immediately confront a great deal of risk. The types of risk vary. For instance, simply going into business and hoping people will buy your product or use your service is a risk in itself. Risk also can be presented when dealing with clients. They may find fault with a service you’ve provided. They may even go so far as filing a claim against your business. This can be quite expensive for your business. Not only will you have legal fees to defend yourself, the court could rule in the favour of the claimant. You might be required to pay a large damage reward to the claimant. Both of these can be very draining on the finances of a business. However, these are ways to protect yourself. Taking out a professional indemnity policy can provide you some peace of mind should you find yourself in this predicament.

Professional liability insurance protects businesses against claims. One of two types of legal expenses can be covered by a professional indemnity policy. First, legal expenses that might be spent trying to settle the matter out of court can be covered. Secondly, any legal expenses that were incurred trying to defend the claim in court will also be reimbursed. Keep in mind this coverage is up to the maximum by the professional indemnity policy. Usually, insurance agents are quite knowledgeable and can provide businesses guidance on what an appropriate amount of coverage would be.


One risk and its effect that cannot be covered with a professional indemnity policy is the damage to a business’s reputation. Often times, even if the company is found not guilty of the claim, sometimes the damage to the business’s name cannot be undone. This could potentially impact business until the cloud blows over.

For more information about professional liability insurance please visit www.markeluk.com.

Alex is the founder and editor of SmallBizPod, the UK's first podcast dedicated to small business, start-ups and entrepreneurship. Alex writes about topical small business issues, entrepreneurs and anything else that catches his eye here on the small business blog. http://www.smallbizpod.co.uk