For most business you’d find on ‘Main Street’, a Commercial General Liability (CGL) insurance policy would offer enough protection. A CGL protects your business if a customer sues you after they slip and fall on your premises or if they get sick eating your food. But for certain types of businesses that offer advice or professional services, they need extra protection in the form of professional indemnity insurance.

Professional indemnity (PI) insurance, also sometimes referred to as professional liability insurance, offers protection if a client sues you alleging that you’ve provided them with inadequate advice or services. This encompasses a range of things like: negligence, accidental breach of confidentiality or defamation. In these cases, your professional indemnity insurance policy would pay for any legal costs involved with defending you in court as well as any damages you are liable for should you lose.

The Different Types of Professional Indemnity Insurance

While all types of professionals from consultants to doctors can benefit from PI insurance, there are different types of policies tailored to different types of professionals.

If you are a doctor, you will need to purchase medical malpractice insurance. As a lawyer, you would purchase legal malpractice insurance.

For accountants, insurance brokers, real estate agents, and IT consultants, they would likely purchase Errors & Omissions (E&O) insurance.

For architects and engineering professionals, their professional indemnity insurance is called Professional Liability.

The actual names may vary but the general idea is that there are different types of professional indemnity insurance policies tailored to the particular needs and risks associated with different professions.

Who should buy Professional Indemnity Insurance?

In many industries, professional indemnity insurance is mandatory. Accountants, engineers, and insurance brokers are typically required by regulators to purchase insurance. For these types of professionals, having PI insurance is required before their license to work is granted. They have no choice but to purchase this insurance and it can usually be purchased directly from their regulatory body or from a related professional association.

For management consultants, IT contractors or those in similar industries, PI insurance is not strictly necessary. However, many companies will not hire a consultant unless they are insured or bonded in some way. Not having insurance might save you some money in the short run but will hurt your ability to win business in the long run.

Even if none of the above applies to you, you should still give it serious thought. While all professionals try their best to provide the best possible work to their clients, mistakes happen. Most are small but if your client suffers a significant financial loss, they are likely to sue. Consider the impact a lawsuit or a judgement would have on your business before writing off PI insurance as another expense item.
To compare a range of Professional Indemnity Insurance policies or quotes in Hong Kong, or if you would like to learn more about this type of insurance coverage, our Trusted Union advisors are ready to help you.
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