Professional indemnity insurance protects UK businesses against claims for negligence, errors and omissions, covering legal costs and compensation when professional advice or services cause financial loss.
0
min read
Professional indemnity insurance protects you if a client claims they've suffered a financial loss because of your work. This matters when you give advice, design solutions, or deliver services where customers depend on your expertise.
It’s one of those policies that many UK business owners instinctively know they should have – but often don't fully understand until they actually need it. If you’re in that club, then you’re in the right place.
Whether you're a consultant, an architect, a software developer, or a marketing agency, understanding what professional indemnity insurance is and how it works can save you from a claim that could seriously damage your finances or reputation.
Professional indemnity insurance (often called PI insurance or simply PI) protects you against claims for financial loss arising from your professional advice, design, or services. This includes things like:
In other words, PI focuses on the financial consequences of getting your professional work wrong.
It operates on a claims-made basis, which means it covers claims made during the policy period (regardless of when the work was actually done, provided it falls after your policy's retroactive date).
When a claim is made, your professional indemnity policy typically covers:
That first point is crucial. PI cover isn’t solely for if you’ve made a mistake. It helps you with legal costs if you’re accused of making a mistake (even if the claim is unfounded, legal costs can be very pricey).
Usually, you’ll need to pay an excess before the insurer steps in, and you'll have a policy limit that applies either per claim (known as ‘any one claim’) or across all claims in a year (aggregate).
Your PI policy won’t cover things like deliberate wrongdoing, circumstances you knew about before taking out the policy, regulatory fines or penalties, or bodily injury and property damage (those fall under public liability and employers' liability insurance instead).
In general, it’ll cover things like:
Public liability and professional indemnity insurance serve different purposes. Professional indemnity insurance covers financial loss that stems from your advice or services. Essentially, mistakes in what you deliver professionally.
Public liability covers third-party injury or property damage from your day-to-day operations (like a client tripping over a cable in your office or damage you cause during a site visit).
If you give advice, create designs, or deliver services where clients depend on your professional judgement, you should seriously consider PI. There’s no fixed list of who should get PI insurance, but typical professions that would benefit from it include:
It's not just about protecting yourself from mistakes. Many clients won't work with you without proof of PI, and most master service agreements, tender processes, and trade body memberships require minimum PI limits. Some regulators also mandate specific levels of cover for certain professions.
This is where iwoca can help. If you win a new contract that requires higher PI limits or you need to pay your annual premium upfront, our flexible funding can cover that upfront cost while you manage your cash flow more effectively.
Professional indemnity insurance isn't generally a legal requirement in the UK, but many regulators and professional bodies do mandate it. For instance, architects regulated by the Architects Registration Board and accountants who are members of certain professional institutes must carry minimum levels of PI.
Even when it's not legally required, contracts often make it compulsory, and clients will typically ask for proof of cover before work begins.
High-exposure roles tend to be those where the financial stakes are significant and the work is highly technical.
Architects and engineers face substantial risk because design flaws can lead to major structural or financial consequences. IT implementation specialists and software integrators can be held liable for system failures that cost clients serious money. Financial and professional services firms handle sensitive decisions that directly affect client finances.
Getting the level of cover right means thinking about the worst-case scenario.
Consider your largest contract values, the potential for consequential losses (where one error cascades into bigger problems), how dependent your clients are on your work, and the data or intellectual property you handle.
You'll also need to choose between ‘any one claim’ limits (which apply to each claim) and ‘aggregate’ limits (which cap your total coverage across all claims in a year).
Check whether defence costs sit inside or outside your limit (outside is better because it means legal fees won't eat into your compensation pot). Also, verify your retroactive date to ensure past work is covered.
Start by mapping your largest client or project value, then think about what could go wrong and what the financial fallout might be. Common coverage bands in the UK are £250,000, £500,000, £1 million, and £2 million or more.
Add headroom for legal costs (which can run into six figures even before any settlement is reached). If you work across multiple clients simultaneously, remember that you could face more than one claim in a policy year, so aggregate limits need to account for that possibility.
When a client or regulator specifies a minimum PI requirement, your policy must meet or exceed that stated limit and match the wording they expect (for instance, ‘any one claim’ rather than aggregate, or worldwide cover excluding USA and Canada). You'll need to obtain a certificate of insurance or policy schedule to prove compliance before you can start work.
Most PI policies start with a base premium, with optional extensions available for things like intellectual property infringement cover, fidelity or crime insurance, and cyber insurance.
Over and above this, pricing depends on several factors:
| Factor | What it means |
|---|---|
| Profession and risk class | The type of work you do and the insurer's perception of the risk associated with that profession. |
| Turnover or fee income | The size of your business and the volume of work undertaken. |
| Claims history | Your previous record of professional indemnity claims, or lack thereof. |
| Limit and excess | The maximum amount the insurer will pay out (limit) and the amount you pay before the insurer does (excess or deductible). |
| Global exposure |
