Small businesses are often set up in rather hurried fashion and insurance is usually the last thing on the owner’s mind. However, companies should think of the consequences of falling into the trap of cost cutting at the outset of the business.
Companies that are in the business of selling professional knowledge will benefit hugely from being covered by professional indemnity insurance (PI), sometimes referred to as professional liability insurance. Without this safety margin you leave your business vulnerable to potential lawsuits made against you for costly business mistakes or negligence on your part. Such suits will typically fall under claims for loss or damage made against you from customers or clients you’ve provided with professional services or advice.
There are particular industries where it is a mandatory requirement to have this insurance in place due to the high risks and stakes involved with the dispensed advice and services provided. These industries include lawyers, solicitors, insurance brokers, architects, mortgage advisers, accountants, financial advisers and brokers.
However it is also very common for consultants, advertisers, designers to take out professional indemnity insurance.
As a manager responsible for your company and the well being of your staff it is important that you factor in PI insurance when going over your yearly budgets to protect you against such a vulnerability. Claims made against you are often entirely unexpected and it’s important that your policy is ‘live‘, accurate for your operations, and that it is never allowed to slip beyond expiration.
It really doesn’t matter how big your business or company is, because even small businesses and independent advisers or consultants make decisions that can have major implications for other businesses and organisations.
The main reasons for taking out professional indemnity insurance are:
- Protect your business against lawsuits, negligence or malpractice
- Provide employee job stability
- Protect your clients from the risk of your mistakes
- Ensure the continued smooth running of your business
As mentioned, professional indemnity insurance is often overlooked by the short sighted business owner. Professional indemnity insurance policies are generally set up based on a claims made basis to insure the holder against any claims or loss made during the particular policy period. But those who recognise its value at the outset and take out a longer period of cover will be rewarded when any unforeseen events inevitably occur further down the line.
About the Author: Harris Balcombe are a loss assessor based in the UK. They help clients receive what they’re owed from loss adjusters in the event of a claim.