Professional Indemnity Insurance For a Small Business

The success of any business, big or small, largely depends on customer satisfaction. However, even the most experienced and skilled worker can make an error or encounter a client who implies that he did. While such a scenario is bound to affect any large company, a small business is likely to be hit even harder. To protect yourself and business from the resultant costs, it is important to consider a professional indemnity insurance. This policy is applicable to an array of fields including legal practice, consultancy, beauty, or any other service industry.

Misconceptions About Professional Indemnity Insurance for a Small Business

  1. My general liability insurance is sufficient

    A general liability policy is helpful since it covers you and your business in case a client suffers bodily harm, property damage, or advertising injuries. Nonetheless, it will not cover all the aspects of a claim made against you after the provision of professional services to a client. For instance, in case the customer suffers a financial loss due to unsatisfactory advice or service from you, you are bound to incur legal costs. Additionally, you may be required to reimburse the client as well as deal with costs related to your tainted reputation. A professional indemnity policy comes in handy in such a scenario.

  2. Only large businesses need a professional indemnity insurance

    Whether you run a small, medium, or large business, it is possible to make an error when offering your services. Moreover, you may get a client who claims that you caused him/her some form of loss. From this perspective, a professional indemnity policy is crucial regardless of the size of your business.

  3. Insurance is expensive

    Small businesses often have a limited budget to work with. As such, it is normal for such an entity to perceive indemnity insurance as a waste of money. This misconception is bound to cost you heftily in case a client presents a claim against you. Fortunately, various insurers have packages that are affordable and suitable for your needs as a small enterprise. Don’t end up losing more than you are trying to save, purchase an apt indemnity policy.

  4. Am good at my work, it’s impossible to get a negligence-related claim

    Errors can be made by the most competent professionals. Additionally, even if you offer satisfactory services, you may still get a client who will claim that the results were imperfect. The subsequent legal fees and time taken to solve the issue will end up costing you a lot; finances that you would have saved if you purchased a suitable indemnity insurance.

What Does Indemnity Insurance Cover?

Insurance companies avail indemnity policies whose details and cost differs. As such, it is crucial to evaluate the small print from different insurers in order to select one that suits your needs. in general, an indemnity insurance will cover the following:

  • Negligence: whether a claim is placed rightfully or unfairly, an indemnity policy will cover all the resultant expenses. The negligence claim may result from the omission of crucial information, delivering services past the time agreed upon with the client, or offering incorrect advice.
  • Legal expenses: Regardless of the size and type of your business, you will incur hefty legal costs if a client accuses you of offering unsatisfactory services. Even if you are not guilty of the alleged error, you will still need to seek the services of an attorney to justify your stand. An indemnity policy will help you go through the legal process.
  • Personal injury: defamation is a form of personal injury whose legal ramifications can be detrimental to a small business. An indemnity policy will come in handy in such a scenario.
  • Independent contractors and temporary staff: As a small business, you may have to hire temporary staff or independent contractors to benefit from the services of extra professionals while avoiding the additional expenses of hiring permanent employees. While these experts are representing your brand, they may make an error that will result in a costly claim from the client. To avoid such hitches, it is crucial to have a suitable indemnity insurance.
  • Claims & damages: A client can present a claim against you and sue for damages for an issue that does not necessarily show negligence on your part. For instance, a consultant in the academic sector may develop a curriculum aimed at improving the test scores. If the pupils’ performance doesn’t improve as expected, the school’s administration may sue the consultant. To protect yourself and business from the resultant expenses, purchase a suitable professional indemnity policy.
  • **Claims for services delivered in the past: Depending on your insurer, the policy will cover a claim made after purchasing the insurance even if the service in question was delivered prior to the purchase. This concept is called the retroactive date and you should enquire about it before buying the cover.
  • Worldwide coverage: Most insurers will cover claims for services you rendered in any part of the world. However, the claim has to be made within their area of operation.

What Doesn’t Indemnity Insurance Cover?

  • Fraudulent deeds: A professional indemnity insurance will not protect you against acts of dishonesty, fraud, or crime. In fact, you may be required to reimburse the insurer of the costs incurred in court while trying to defend your actions.
  • Employment issues: The policy will no cover you in case of a claim presented against you for unacceptable deeds committed against your workers. This also includes claims emerging from not compensating your workers as required or an employer’s liability claim.
  • Personally identifiable data: The policy will not be applicable if it is found that you failed to protect personally identifiable details that were in your control, custody, or care.
  • False advertising: A professional indemnity insurance will not cover you and your business if the presented claim results from you making a false advertisement.
  • Additional services: The insurance will not be applicable if the service in question was not included in the policy documents.
  • Property damage or bodily harm: In case you harm someone or damage their property, you will need a general liability and not a property indemnity insurance.

How Much Does a Professional Indemnity Insurance Cost?

Different insurers offer a professional indemnity insurance at different prices. The good thing is that no company offers a one-size-fits-all policy. As a small business, the best approach to take in order to identify an affordable professional indemnity cover that suits your need is to go through the small print from different insurers.


Professional indemnity insurance is not only meant for big companies. In fact, professionals with small businesses need it just as much since a claim may result in hefty losses that the establishment can’t handle. To purchase one that suits your needs and those of your growing business, ensure that you read and compare the small print from different insurers.