What is professional indemnity insurance?

Professional indemnity (PI) insurance is there to protect your business if a client or third party loses money because of your advice or a service you’ve provided. It helps cover the costs of defending claims and paying any compensation if you’re found responsible.

Without this cover, you could end up having to pay legal fees, compensation, or other costs if a client says your advice caused them a financial loss.

You don’t have to have PI insurance by law, but many professional bodies and trade associations expect it. Having a policy in place gives both you and your clients peace of mind that you’re covered if things go wrong.

What does professional indemnity insurance cover?

Professional indemnity insurance helps protect your business if a client or third party suffers a financial loss because of a mistake or oversight in the advice or services you provided.

Even if the work or advice was unpaid, a claim could still be made. Having this cover in place can save you from potentially expensive legal and compensation costs.

Exact levels of cover vary between insurers and policies, but here’s an example of what you can get:

Compensation payments

Cover the cost of compensation if a client suffers a financial loss because of a mistake in your advice or other services provided

Legal defence costs

Solicitors’ fees, expert advice and court representation are included.

Court attendance costs

Many policies pay a set amount per day, say £250, if directors, partners, or staff need to attend court

Flexible cover limits

Choose the level of protection that suits your business, often up to £5 million.

This cover is designed to give you confidence to run your business knowing that if a client alleges a mistake or oversight, you’re not left facing expensive legal bills or compensation on your own.

What does professional indemnity insurance not cover?

PI insurance covers a lot, but there are some areas it doesn’t touch:

  • Fraud or criminal acts: Any deliberate wrongdoing, misleading of clients or illegal actions aren’t covered.

  • Property damage or personal injury: If someone is physically hurt or property is damaged, that’s handled by public liability insurance.

  • Cybersecurity issues: Data breaches, hacking or other cyber problems generally require separate cyber liability cover.

  • Employment disputes: Claims from employees or contractors, such as unfair dismissal or workplace conflicts, are not usually included.

  • Incidents before your policy starts: Only mistakes or claims that happen after your policy begins are covered, so it’s important to arrange cover from the start of your business.

Who needs professional indemnity insurance?

If your business involves providing advice, expertise or other professional services, PI insurance is worth considering, whether you’re self-employed or run a company.

Some professions are required to carry it by their regulators:

  • Solicitors.

  • Accountants.

  • Architects.

  • Chartered surveyors.

  • Financial advisers.

  • Certain healthcare professionals.

Even if it’s not mandatory, many other businesses take it out to protect against mistakes or oversights, including:

  • Consultants and IT professionals.

  • Creative agencies, designers and PR firms.

  • Engineers and architects.

Having PI insurance not only protects your business but also reassures clients that risks are managed responsibly.

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Page updated on 19th November 2025, Reviewed by Richard Groom