What is Professional Indemnity Insurance?

Mary McMahon
Mary McMahon

Professional indemnity insurance is a type of insurance which is designed to protect professionals from claims made against them by clients. This type of insurance may cover legal fees involved in a suit, along with any payouts determined as a result of a lawsuit. This insurance product is required by law for people in some professions, and strongly encouraged for others, as a lawsuit can be financially crippling in addition to highly damaging to someone's reputation, and this type of policy can help people weather the strain of a lawsuit.

Man climbing a rope
Man climbing a rope

This type of insurance is designed to provide financial protection in the event that someone makes a mistake and a client sues or makes a claim. Basic professional indemnity insurance just covers negligence, while other policies may cover breach of duty, civil liability, intellectual property disputes stemming from accidental infringement, and loss or damage of data or records. For example, professional indemnity insurance might come into play if an accountant failed to store financial records properly and a client sued.

Doctors and lawyers are often legally required to carry this insurance product, but professionals in all kinds of fields can benefit from carrying a professional indemnity insurance policy. Although the costs of the premiums can be high, especially in high-risk professions, the benefit of the insurance definitely outweighs these costs. A single suit can make the insurance pay for itself, and people in professions which notoriously attract litigation may be involved in several suits over their course of their careers, which certainly justifies the purchase of professional indemnity insurance.

Each profession and professional has slightly different needs. Only a limited number of insurance companies offer this product, and it is a good idea to go to an insurance specialist to discuss whether or not a policy is needed, how large the policy should be, and what types of situations the policy should cover. A good insurance professional will not be afraid to tell someone that the insurance is not necessary or that only a limited policy is needed if he or she believes that extensive coverage would not be in the best interests of the client, and insurance professionals can also provide detailed advice on the types of products and coverage available.

People who require multiple insurance products may be able to receive a discount for buying a package of insurance products which includes professional indemnity insurance. Having insurance issues handled by a single provider can also be beneficial by simplifying matters and making it much easier to file and handle claims.

Mary McMahon
Mary McMahon

Ever since she began contributing to the site several years ago, Mary has embraced the exciting challenge of being a wiseGEEK researcher and writer. Mary has a liberal arts degree from Goddard College and spends her free time reading, cooking, and exploring the great outdoors.

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Discussion Comments


What is the difference between a profession indemnity policy and an error and omission policy?


@Valencia - it makes sense for teachers to have some kind of insurance in case a student is hurt in their care. Other situations could be the teacher failing to send the applications on time, or making a major mistake in grading.

I assume most schools have general insurance to protect their staff, but these days people may prefer to provide their own too, for extra peace of mind.


I can see how doctors would need this insurance, but what about teachers? Are there situations where someone would sue for failure to provide an education? (Say the teacher took a lot of time off, or didn't grade homework, and the student failed to get into college?)


Good, useful article- I needed it for research purposes. Thank you!

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