Professional indemnity insurance

Professional indemnity insurance can help pay legal defence and compensation costs if a client claims your advice, designs or professional services caused them a loss. It is often called PI insurance. Protection depends on the activities insured and the policy’s terms, limits and exclusions.

If you need cover for work already completed, read the previous-work section below before choosing a policy.

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Who needs professional indemnity insurance?

Consider PI insurance if a client could claim that relying on your professional work caused a loss. Focus on the services you provide and how clients use your work. Your business structure alone does not determine whether you need cover.

Activities to consider include:

giving advice or recommendations;
producing designs, specifications or technical plans;
providing consultancy, analysis or specialist expertise; and
delivering IT or other professional services that clients rely on.

For consultants, a client might claim that mistakes in your analysis caused them a loss. For IT contractors, a claim might concern an error in development, configuration or implementation. Describe the work you do, rather than relying on your job title.

Is professional indemnity insurance compulsory?

Requirements depend on your work and the rules that apply to it. Some professions have legal or regulatory insurance obligations. A professional body may impose its own conditions, while a client may require cover under a contract even where no professional rule applies.

Check the current requirements for your activities, registration and location. A professional requirement may specify acceptable policy terms as well as a limit. It does not establish that every insurer or comparison journey accepts that profession.

What if a client requires professional indemnity insurance?

Read the insurance clause before choosing a policy. Check the required limit, the services it must cover, territorial or court-jurisdiction conditions and how long you must maintain cover, including after the work ends.

Ask the broker or insurer whether the proposed policy meets the actual wording, rather than relying on the amount shown on a certificate. A client’s minimum requirement does not necessarily address every risk your business faces.

What does professional indemnity insurance cover?

Claims may concern incorrect advice, something you left out or a mistake in how you delivered a professional service.

Mistakes in professional advice or services

A client may seek compensation if they believe they lost money because they relied on your work. The claim could concern an incorrect recommendation or a failure to identify something within the agreed scope of your service.

Hypothetical example: a consultant recommends changes to a client’s purchasing process. The client claims that a mistake in the advice led to unnecessary spending and seeks compensation. Disappointment with the result alone does not establish legal liability.

Mistakes in designs or technical services

Inaccurate technical work can also lead to an allegation of professional negligence. Check that the description of your services includes the design, implementation or other technical responsibilities you undertake.

Hypothetical example: an IT contractor configures a client’s system. The client alleges that a configuration error disrupted its operations and caused financial loss.

These examples are illustrative. Whether a claim is covered depends on the circumstances and policy terms.

Legal defence and compensation costs

A covered claim may involve legal defence costs, an agreed settlement or compensation you are liable to pay. You may need to respond to a claim even if you believe you did nothing wrong.

Notify the insurer of claims or problems that could lead to a claim (often called “circumstances”) within the deadlines in your policy, even if you dispute the allegation. Follow its consent requirements before appointing lawyers, admitting liability or agreeing a settlement.

Legal defence costs may count towards the available limit rather than being paid on top. Check the policy wording and schedule for how those costs are treated.

Read the professional indemnity claim examples for fictional consultant and IT scenarios and the facts and policy terms to check.

What does professional indemnity insurance not cover?

PI insurance does not cover every client dispute or business loss. Check the following restrictions when comparing policies.

Type of claim or activity	What to check
Services outside the insured activities	Make sure the business description reflects the professional work you actually undertake, including additional services.
Known claims or circumstances	Disclose relevant matters when arranging cover and follow existing notification conditions. Buying a policy after a problem emerges does not automatically insure it.
Contractual promises	Extra liabilities you accept under a contract may go beyond the cover. Check guarantees, indemnities and other promises before agreeing them.
Refunds, redoing work and commercial disputes	A liability claim differs from a demand to complete work or refund fees. Do not assume those costs or lost income are insured; check whether additional cover is available.
Injury or physical property damage	Cover depends on the cause and policy terms. Check whether PI, public liability or another policy addresses the risk.
Cyber incidents	Check cyber exclusions and any specific extensions. PI is not a substitute for assessing cyber cover.
Deliberate or dishonest conduct	Restrictions may distinguish the person responsible from other insured people. Do not assume all conduct, or everyone insured under the policy, is treated alike.

If you subcontract professional work, ask how the policy treats your liability for those services and whether the subcontractor needs separate insurance.

If you work with overseas clients, check where you can carry out insured work and where claims can be brought.

Our guide to business insurance exclusions explains how to read restrictions alongside the cover offered.

Does professional indemnity insurance cover previous work?

It may, but protection for earlier services depends on the policy’s dates, insured activities, disclosures and the circumstances of the claim. Having completed the work before buying the policy does not by itself establish whether it is covered.

Claims-made cover and notification

PI is commonly written on a claims-made basis. Claims-made cover depends on when a claim is first made against you. The policy also sets deadlines for reporting claims and potential problems.

A policy that was active while you did the work will not necessarily respond to a claim first made after it expires. Some policies can also respond to a later claim arising from a problem properly reported during an earlier policy period. Check the wording for the conditions.

If a problem arises, follow the notification procedure promptly. Do not wait for a formal legal demand if the policy requires earlier notification of circumstances. For the distinction between policy types, read claims-made vs claims-occurring insurance.

Retroactive dates and earlier projects

A retroactive date, sometimes called a previous work date, can set the earliest date from which work is eligible for cover. It is different from the start date of the current policy: agreeing protection for earlier work does not mean the policy itself began earlier.

Illustration: a policy with a retroactive date of 1 January 2024 does not automatically protect a project completed in 2023. Work carried out after that date still has to meet the other conditions, including insured activities, claim timing and disclosure requirements.

Check the retroactive date against when you began providing the services you want insured. Tell the broker or insurer about any gaps in cover and any known problems; an earlier date does not remove the need to disclose them.

Switching insurer

Before switching, compare protection for previous services as well as the new price. Check the retroactive date, any changes to insured activities, exclusions and the handling of claims or circumstances already notified. Do not cancel existing arrangements before confirming the replacement and how past work will be treated.

Before the existing policy expires, check whether any claim or circumstance needs to be notified under it. Do not assume the replacement insurer will cover a known matter.

Stopping work and run-off cover

Run-off cover may protect against claims made after you stop providing professional services, for work you did beforehand. Protection depends on its terms. Stopping work does not prevent a later claim. The suitable period depends on your obligations and circumstances; there is no single duration for every business.

Read more about retroactive dates and run-off cover before changing or ending your arrangements.

How much professional indemnity cover do you need?

Choose a limit by considering applicable professional requirements, client contracts and the losses your services could cause. The size and complexity of a project matter, but your fee or contract value alone does not determine how much a client might claim.

An error in a relatively small piece of advice or technical work could affect a larger business decision or operation. Consider how much a mistake could cost your client, then compare that with the cover available. Include defence costs and any separate restrictions on particular claims.

For a fuller assessment, read how much professional indemnity cover you need.

How do limits and excesses affect your protection?

Two quotes showing the same limit can operate differently. Use the checks below to understand what could be available when a claim arises and what your business may have to contribute.

Feature	What to check
Limit for each claim (per-claim)	Check the amount available for each covered claim and any separate caps for particular claims.
Total limit for the policy period (aggregate)	Multiple claims share this amount, so earlier payments can reduce what remains.
Related claims	Check if claims arising from connected work or errors are grouped and treated as one claim.
Defence costs	Check if these reduce the stated limit, are paid in addition or have other restrictions.
Excess	The amount your business contributes where required, how often it applies and whether it also applies to defence costs.

Check that you could afford the excesses that apply. Our guide to business insurance limits and excesses explains these arrangements in more detail.

How much does professional indemnity insurance cost?

The price depends on the services you provide and the cover you choose. Insurers assess the likelihood of a claim and the potential loss, so businesses with similar fee income can still receive different quotes.

Your services: advice, design and technical implementation can lead to different allegations and losses. Describe the work accurately.
Business size: fee income or turnover can indicate the scale of your work. The measures used depend on the insurer and services provided.
Projects and clients: complexity, contractual responsibilities and client locations can affect the risk and terms offered.
Claims history: previous claims and potential problems can affect terms or availability as well as price.
Cover selected: limits, excesses and included extensions change the protection being priced.

Compare the price alongside exclusions, defence costs and the retroactive date. If paying by instalments, check the total payable and any charges.

See our guide to professional indemnity insurance costs for more detail on comparing prices.

Professional indemnity, public liability and cyber insurance: what’s the difference?

These policies address different types of claim or loss. The source of a claim or loss helps identify which policy needs checking.

Policy	Main distinction
Professional indemnity	Legal liability arising from professional advice or services, within the policy’s scope.
Public liability	Legal liability for injury to third parties or damage to their property connected with insured business activities.
Cyber insurance	Costs and losses from cyber incidents covered by the policy, which may include incident response, your own losses and liability to others.

A malicious attack raises different coverage questions from a professional mistake, even if both disrupt a client’s system. One incident can involve both issues. The policies are not automatically interchangeable; each policy’s terms determine its response.

Read about public liability insurance or compare public liability vs professional indemnity.

What information do you need to compare quotes?

Have the following information ready when you compare quotes through Simply Business:

professional services and activities, including any additional work;
business details and relevant fee income or turnover;
project types, responsibilities and client locations;
relevant claims and known circumstances that could lead to a claim;
the limit required and contractual insurance conditions;
existing cover and its retroactive date, where applicable; and
your preferred start date.

When arranging business insurance, you must make a fair presentation of the risk. This generally means clearly disclosing material information your business knows or ought to know. Alternatively, you must give enough information to alert the insurer to ask further questions. Answering the questions alone may not be enough.

If the business description does not fit your services, or you are unsure what to disclose, ask the broker or insurer before buying.

Requesting a quote does not start cover. Check that cover is confirmed and its start date is correct before relying on it.

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