When founding your own start-up, you’ll have a thousand things to think about, from cementing a business plan to building your first website. But one of the most important things to carefully research at this time is PI insurance – or professional indemnity insurance, as it’s known. This type of insurance can protect professionals from crippling compensation claims, and can even be the difference between success and failure in the formative years of any start-up.
What is professional indemnity insurance?
Professional indemnity insurance protects you and your team if you’ve provided poor advice, designs or professional services to a client. The insurance covers all legal costs and expenses that relate to the claim, and if the client wins the claim, it provides the compensation required to rectify any mistakes.
Professional indemnity insurance covers things like professional negligence, loss of documents or data, unintentional breach of confidentiality, loss of goods or money, libel, defamation and a multitude of other scenarios that could potentially put your fledgling start-up out of business.
Here’s an example…
A marketing agency was asked to create a printed advert for a client, with the intention of directing people to the business’ website to find out more. The marketing agency missed out a letter in the URL of the client’s website, which meant that everyone was directed to a totally different website – the client missed out on vital traffic and leads, as well as potential profit from those leads.
The client sued the marketing company, whose professional indemnity insurance covered their legal costs and the compensation which had to be paid to the client in order for them to have the batch of adverts re-printed. This saved the marketing company thousands of pounds and allowed them to continue to operate as normally while the claim was being settled.
Do I need professional indemnity insurance?
If you provide any kind of professional service or advice to your clients, it’s recommended that you get professional indemnity insurance. The vast majority of people never need to make a claim on their professional indemnity insurance, but for some it’s a vital safety net that helped them avoid sinking into the red after an error or a mistake.
As an experienced professional, clients want to know that they can rely on your skills – you’re being hired by them on the basis that you can provide quality advice that will benefit them. If they incur financial loss as a result of any error, no matter how small, you can be held liable for all related costs, and without the insurance cover, it can leave your business thousands of pounds out of pocket.