If you’re a tradie, you’ve probably heard of professional indemnity insurance. In fact, there may have been some clients who declined to work with you because you didn’t have such coverage. Did you wonder or ask why they refused? What’s so important about professional indemnity insurance that they don’t want to work with tradespeople who aren’t covered?
To understand what this kind of insurance really is and why you need one, read on below.
What is Professional Indemnity Insurance?
In Australia, all professionals who provide advice or services to clients are urged to get a professional indemnity insurance policy. Professional indemnity insurance is intended to cover the cost of claims made by customers or other third parties who may have suffered losses due to a business. These losses may be deemed to be caused by an act of negligence, omission, or breach of duty on the part of the professional. Moreover, the losses can range from financial losses and damage to property, to physical injury and even loss of life.
Without any professional indemnity insurance, you won’t be able to effectively protect your professional assets and reputation. With an ample professional indemnity insurance policy, you don’t have to pay legal costs and compensation payments out of your own pocket. Moreover, you don’t have to worry about lost income while you’re defending yourself from any allegations.
Do note that not everyone is obliged to get professional indemnity insurance. However, there are also professions that strictly require professional indemnity insurance as dictated by an industry regulatory body. The key thing to appreciate here is that having a professional indemnity insurance policy can help you get more customers. More importantly, it can give you and your clients some peace of mind.
Why Do You Need Professional Indemnity Insurance?
As a tradesperson, you probably do everything in relation to your business. You perform duties related to human resources, accounting, and marketing, among many others. But due to human limitations, you may sometimes make errors as you perform your duties or give advice to your clients.
Professional indemnity insurance protects you from the consequences of these totally human mistakes. Most of the time, these consequences are simply financial in nature like settlement amounts, legal representation, and other fees. What is perhaps even more critical is your reputation, which can suffer a huge blow thanks to any unsavoury allegation against you and your business. This can also reflect upon not just you but also your employees and business partners. With any professional indemnity insurance in place, you can conduct your business with confidence knowing that every base is covered.
Who and What Does Professional Indemnity Insurance Cover?
Most policies cover you and your business, as well as any principal. Employees, business partners, as well as third-party suppliers and contractors are also covered—as long as it can be determined that they were performing their duties and acting on behalf of your business.
When it comes to costs, professional indemnity insurance can cover investigation costs, legal fees, and settlement costs. If you incurred public relations costs, these may also be covered by the policy. Your professional indemnity insurance can also include public and products liability covers. This is when you have to pay for the aggrieved party’s losses, which have been caused by your products or services. Lastly, a professional indemnity insurance policy can also provide retroactive and run-off coverage. The former are claims of losses from your acts or errors that happened before the beginning of the insurance coverage. Meanwhile, the latter can provide protection after your retirement.
It doesn’t matter whether you’re a business consultant, carpenter or plumber, dance instructor, or IT professional. It’s important to get professional indemnity insurance coverage. You’ll find that it won’t just be for your own protection. It will also be a display of your professionalism.