HOW DOES INDEMNITY INSURANCE WORK AND WHO WOULD BENEFIT?
Running a business in today’s world is hard work, and you have so many responsibilities to consider, you don’t have the time to worry about potential legal issues against you or your business.
With more freelancers than ever before and individuals setting up as sole trader businesses and as advisory services, it is critical to know that you have the right insurance of being protected when mistakes are made.
Too many entrepreneurs don’t realise that they are not doing a good enough job of protecting their businesses from any unforeseen claims made against them.
There are so many ways in which a company can be at risk in the modern world, so this elevates the importance of taking steps to protect the company more effectively.
As such, there are multitudes of insurance premiums and programs out there for businesses looking to protect themselves and their reputations.
As a business owner, indemnity insurance is certainly something you should be looking at, and you need to know what it is, how it works, and who would benefit from it. So, here is a breakdown of professional indemnity insurance.
What Is Indemnity Insurance?
Indemnity insurance is an ensured coverage that protects against any financial or legal claims made against you or your business from a client due to your advice, services or negligence.
This will typically be owed in the event that you have provided an inadequate service, product, or advice that has led to your client making a loss and suffering by way of reputation or finances.
This is a serious issue that can have serious repercussions, so you need to make sure your business is prepared for dealing with this.
What Does Indemnity Cover?
There are plenty of things that can be covered by indemnity insurance, and this is what makes it so essential for companies or professionals. Here are some of the things that indemnity insurance can cover you for:
- Breach of copyright/contract – This is where you share sensitive information without permission to do so.
- Negligence resulting in financial loss – This is pretty self-explanatory, and is where you provide poor advice or information that causes a client to experience financial losses.
- Financial losses – A company made a financial loss due to your advice or negligence
- Defamation – Making or supporting comments about your client that would be classed a libellous.
- Employee cover – If an employee intentionally or unintentionally causes a loss to a client due to his or her negligence.
Why Do You Need It?
So why might your business need indemnity insurance? Well, the most apparent reason to get indemnity insurance is to protect your company if you work in specific industries, and, in fact, in some sectors, it will be a legal requirement for your business.
If your company offers advice, skills, or knowledge as part of your business, then you’re probably going to need indemnity insurance.
Examples of the sorts of professionals or businesses that might need to plumb for professional indemnity insurance include management consultants, PR companies, web designers, financial or business advisors, solicitors, and architects.
If your clients wind up making a loss financially or suffering in regards to their reputation, as a result of your advice or actions, then you could be liable for legal action and remunerations.
Indemnity insurance will protect you here and will deal with payouts so that your company’s future is protected.
Example Of When You Need Indemnity Insurance
There are plenty of examples of how professional indemnity insurance might work. Let us say if you are a web designer, and you create a website for your client.
The client is sued over unlicensed images used on the website, so the client then sues you.
The indemnity insurance premium would cover the cost of this payout, saving you (the web designer) time, money, and damage to your company.
Where Can You Find It?
If you are looking to find professional indemnity insurance that is going to suit your business, then you can find different policies online.
There are plenty of providers out there offering policies, so you need to look at how you can choose the right policy.
Find comparison sites that can help you find different types of indemnity insurance, and approach some of the leading names in the industry to get quotes you can compare.
How Much Will It Cost?
There is no right way to determine the exact price of indemnity insurance because the policy varies from business to business. It can start from as little as £10 a month for a freelancer working in the advisory sector.
There are several factors that play a role in determining the cost of this insurance premium for your business. The two most important factors here are the size of your business and the nature of the services you carry out.
For example, a more substantial business is going to have a bit more at stake usually, and so their policies tend to be higher than a small business might expect to pay.
Additionally, if you run a business in a high-risk sector, such as investing or a financial brokerage, this is also going to impact the cost of the insurance as well.
Can You Add Additional Cover To The Policy?
One of the great things about indemnity insurance is the fact that there are plenty of optional extras that you can add to your professional indemnity policy, in order to make it more complete.
This is really useful for adding an extra layer of protection to the business, and things like data protection, business documents, and court attendance costs are all some of the things you can add to the policy to further cover yourself.
Difference Between Professional Indemnity & Public Liability Insurance?
It is important to note that public liability insurance and professional indemnity insurance are not the same things, though they may appear to be, and people often confuse the two.
The main thing to remember is that public liability insurance applies to members of the public being injured or making a loss as a result of your company’s mistake, whereas professional indemnity insurance applies specifically to claims made by your clients due to your advice or services.
It’s something to consider when you are looking to choose the ideal policy to look after your business and to ensure it is protected.
Professional indemnity insurance is one of the most important things that you need to sort out as a business owner.
You have to make sure you do as much as possible to protect the business and yourself, and this is one of the critical ways of ensuring that.
Understand what indemnity insurance is and how it works, and this can help you choose if this insurance fits your business services.