What is professional indemnity insurance, and who needs it?

What "indemnity" means

Indemnity means being put back where you were before something went wrong. So indemnity insurance is cover that pays to undo a loss, and professional indemnity is the version that covers losses your work causes a client.

What professional indemnity insurance covers

Purely financial loss. Nobody is injured, nothing is broken, and your client is out of pocket because of your advice or your work. If a client could plausibly say "I followed your advice and it cost me money", this is the policy that answers.

If someone is hurt or something is damaged, you are in public liability territory instead, which is a separate policy answering a separate question.

What a claim looks like

• A figure transposed in a costing, and your client builds a budget around it.

• A specification that does not match what the job needed, so the work gets done twice.

• A detail you should have flagged but missed, which the client then pays to put right.

• A report or a design with an error in it, relied on by someone downstream.

• A deliverable a client says was not fit for the purpose you were engaged for.

What sets the size of a claim is what the client lost, not what you charged. A €2,000 piece of work can produce a claim many times that if the error runs into the client's own operations.

Public liability or professional indemnity?

Public liability answers injury to people and damage to property. You drill into a pipe and flood a client's stockroom.

Professional indemnity answers financial loss from your professional work. Your advice leads a client to a costly wrong decision.

Plenty of Irish businesses carry both exposures at once. An information technology (IT) contractor can damage equipment on a client site and separately cause an expensive outage through a configuration error. An interior designer can knock over a client's artwork and separately specify a material that has to be pulled out and replaced. They are two separate policies, and where both apply to your work you can take them together.

When the claim arrives matters

Professional indemnity responds based on when a claim is made against you, not when you did the work.

Financial-loss claims often surface long after the job. Advice given in one year can take until the next to prove costly, and a design decision can sit quietly until someone acts on it. So what matters is not having a gap between one policy ending and the next starting. How far back a policy reaches is set out in its own documentation.

Who it is for

Work where clients rely on your advice, your expertise or something you deliver. Examples include:

• Consultants and advisers, from strategy and change work to market research.

• Information technology and software, where a configuration error can cost a client real money without breaking anything.

• Marketing, design and creative work, including copywriting, editing and translation.

• Human resources, recruitment, coaching, training and education.

• Interior design and space planning, along with administrative support.

• Accounting and payroll advisory work, where an error in the figures carries a measurable cost.

• Personal trainers, yoga instructors and complementary therapists, who can hold it alongside their public liability cover.

What it costs

With Insify, Professional indemnity starts at €10.80 per month. The price depends on things like your profession, your annual revenue, the cover limit you choose and your excess. A higher excess lowers the monthly premium.

Insurance for self-employed people and sole traders in Ireland

Insify offers business insurance for self-employed people and sole traders in Ireland:

• Professional indemnity insurance is for claims that your advice or your service cost a client money.

• Public liability insurance is for claims that your work injured someone or damaged their property, with employers' liability available as an optional addition once you have staff.

Insify is an insurance intermediary, not the insurer. Cover is underwritten by our insurance partner, named in your policy documents. This article is general information about business insurance in Ireland and is not tax, legal or financial advice. Cover, limits, conditions and exclusions described here are indicative and non-contractual; only the terms of your policy apply, and you should read your policy documentation before taking out cover.