Professional Indemnity Insurance

From sole traders to large firms, businesses offering professional services are exposed to a range of potentially very costly risks. Even the most careful business owners can be sued if something goes wrong, whether it’s within their control or not. Professional indemnity insurance policy includes protections for a range of these risks, helping you pay for expensive court proceedings due to a covered event and bringing greater peace of mind.

What is professional indemnity insurance?

Professional indemnity insurance is a form of business insurance cover designed to protect against claims of negligence against businesses that offer professional services or provide advice. If an error is made in providing professional services to an individual or company, businesses are vulnerable to legal action being taken against them.

What does professional indemnity insurance cover?

The main inclusions on a professional indemnity insurance policy are:

• Professional negligence, such as misleading advice, errors, omissions or lack of due care
• Breaches of duty, such as breaches of confidentiality, fiduciary duty and trade practices
• Costs related to defending a claim in court or disciplinary proceedings, including defamation cases
• Costs related to investigating the claim
• Compensation required to be paid to a claimant if you’re found liable for a covered event
• Court-awarded damages to be paid to the claimant

What isn’t covered by professional indemnity insurance?

• Intentional, malicious or dishonest conduct resulting in client harm
• Contractual liabilities, such as specific damages outlined in a contract regardless of fault
• Acts of fraud, dishonesty, or intentional illegal actions
• Claims relating to personal injury or property damage due to your business’ activity or a product you produce (public liability insurance and product liability insurance, respectively)

The exact inclusions and exclusions will depend on your insurer and the product you take out. It’s crucial to check your product disclosure statement (PDS) to confirm what is and isn’t covered.

Is professional indemnity insurance compulsory?

Professional indemnity insurance isn’t required for all businesses by law. However, there are certain situations and professions where you’re required to take out professional indemnity cover. These include:

• All health practitioners must hold professional indemnity insurance to a registration standard, according to Ahpra.
• Lawyers are typically required to hold professional indemnity insurance. In New South Wales, this is covered by the Legal Profession Uniform Law (NSW). However, some exceptions to this apply depending on where you’re practising. For example, in Victoria, professional indemnity insurance is mandatory when working in a private practice or community legal service, but not for corporate or government legal practitioners (except when acting as a volunteer).
• All accountants providing public services in Australia must hold a professional indemnity insurance policy of between $2 million and $75 million.
• Architects must have adequate professional indemnity cover, with specifics depending on their state or territory. In Victoria, professional indemnity cover is required with a minimum limit of indemnity of $1 million (or $1.2 million with defence costs included) for each claim.
• The Mortgage and Finance Association of Australia (MFAA) requires all broker members to hold professional indemnity insurance of at least $2 million per claim and in the aggregate.

Should I still get professional indemnity insurance if it isn’t compulsory for my business?

Even if your business isn’t required to have professional indemnity insurance by law or your industry body, it’s important to understand how it can protect you and your finances. Here are a few examples of where your policy might come in handy:

• You provide copywriting services to a company and your work inadvertently plagiarises that of another writer, causing the company who hired you to be sued
• Your travel agency accidentally provides the wrong flight details to a client, causing them to miss their flight and forfeit non-refundable accommodation and experience bookings
• Your PR consultancy firm’s advice results in significant backlash for your client business, causing financial and reputational harm

Business insurance providers you can compare with Savvy

We’ve partnered with BizCover to bring you a range of business insurance policies to help you compare them side by side.

How much does professional indemnity insurance cost?

There’s a wide range of factors that can impact the cost of your professional indemnity insurance policy. According to BizCover, the average monthly premium for different industries across the 2023-24 financial year were:

As you can see, industry is one of the most significant variables that insurers consider when calculating your premiums. Here’s a list of some of the other key factors:

• Your business’ size and revenue: the larger your business is, the more money it makes and the more clients it works with, the more you’ll pay for your professional indemnity cover.
• Where you’re located or operating: depending on where you’re located throughout Australia, your risk profile might change.
• The amount of cover required: purchasing $20 million in cover will obviously cost more than the same policy with $5 million.
• Your business’ claims history: insurers will reward businesses without a long record of past claims, as they’ll be seen to have a lower risk profile. This extends to the individuals operating within your business who’ll be covered by the policy.

What’s the difference between professional indemnity insurance and public liability insurance?

Public liability insurance covers your business for physical risks posed to members of the public, namely activity that causes injury to someone or damage to their property. For example, slipping on a wet floor, tripping over a stray cable or spilling coffee over a laptop are all events that could be covered by public liability insurance.

If your business has a physical location open to customers and the general public, you may wish to take out both professional indemnity and public liability insurance to maximise your coverage.

How to buy professional indemnity insurance through Savvy

1. Fill out a quick business insurance quote

   Start off by filling out details about yourself, your business and the cover you’re after. This is done through our partner BizCover’s portal.

2. Compare policies online

   Once all this information is completed, you’ll be shown a range of quotes available through BizCover’s partners that are tailored to your business.

3. Pick the best available deal and purchase it

   When you find a professional indemnity insurance policy you like the look of, you can go ahead and buy it for your coverage to start as soon as today. It really is that simple!

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