SMEs and professional indemnity

Professional indemnity insurance is vital, if your small business is offering services based on professional skills or knowledge.

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7th August 2012 at 10:34 am

If your SME business provides services based on professional skills or knowledge, then professional indemnity insurance cover is an essential part of your business risk management plan. Also known as PI insurance, this type of cover protects businesses where a claim has been made by a client for negligence, omission or mistakes in the services they have provided. The claimant must prove that they or their business has suffered a loss – for example by business interruption or loss of potential business – as a result.

Not all claims are upheld, but expenses and management time will still be incurred either way. As the potential costs could be high many professional services, like solicitors and lawyers, must have PI insurance in order to practice.

Many other professionals also choose to have PI insurance cover, including architects, advertising agencies and recruitment agencies. They do so because they recognise the reality that they are vulnerable to potential claims by unhappy clients and could therefore benefit from having the cushion of this type cover in place. You can find it online from companies like Endsleigh.

All businesses carry some risk, but with professional services sometimes it’s not immediately evident to either the business or the client that anything has gone wrong. For this reason it’s important to maintain your PI cover once started as there may be a significant time lag between the events which lead to a claim and the actual claim being made.

As with all types of insurance, support can only be given while the policy is valid, and so maintaining cover is a vital aspect in ensuring that your business is sufficiently protected. Every business plans to give the best possible advice, do a great job and keep their clients happy, of course. The unexpected can and does happen though, and it is these unfortunate, unplanned events that PI insurance cover provides for.   

Jane Tchan

Jane Tchan is editor of SmallBizPod. She has more than 30 years of experience gained from working across a diverse range of industries, including tourism and leisure, retailing, sports sponsorship and food. During that time she has edited a variety of publications and online media http://www.smallbizpod.co.uk

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