Professional Indemnity Insurance (PI) is a type of insurance that provides a firm with protection against the consequences of possible liability to pay damages to third parties for breaches of professional duty in the course of its practice.
It therefore protects a firm from financial loss that cannot be met from the firms own resources. Protecting both the firm and client and acting as an important public interest function.
The following are different types of business activities that require professional Indemnity Insurance:
Accountants
Professional Indemnity Insurance coverage is compulsory for members of the Institute of Chartered Accountants and the Association of Chartered Certified Accountants.
The minimum limit of indemnity required by the ICA is two and a half times the gross fees of the practice for the last financial year, subject to a minimum of £5,000,000 for sole practitioners and £10,000,000 for all others.
Engineers
With recent developments in the construction industry and new legislation affecting the profession such as the Housing Grants Construction Regeneration Act 1996, professional indemnity insurance is seen as an ever more essential protection for an engineering firm’s balance sheet. The level of cover is dictated by contract requirements.
Solicitors
Professional Indemnity Insurance is compulsory for all solicitors practising in England and Wales. A firm must maintain qualifying insurance in accordance with the Rules laid down by the Solicitors Regulation Authority.
Since 1st September 2000, the market for Professional Indemnity Insurance has changed allowing firms to obtain cover from qualifying insurers, previously only provided by the Solicitors Indemnity Fund. There are some compulsory levels of cover these are as follows:-
- A Body Corporate firm must have at least £3,000,000
- Other firms such as sole practitioners and partnerships must have at least £2,000,000
Surveyors
Professional Indemnity Insurance is compulsory for members of the Royal Institute of Chartered Surveyors. The cover must comply with the minimum policy wording and be placed with an approved insurer and as a minimum requirement, the policy wording should be written on a full civil liability basis with an ‘each and every’ claim basis. RICS minimum limit requirements are:
- £250,000 where the gross income is £100,000 or below
- £500,000 where gross fees are between £100,001 and £200,000
- £1,000,000 for gross fees in excess of £200,001
Contact our team today to learn more about how we can help provide your with Professional Indemnity Insurance.
