What is professional indemnity insurance?

Professional indemnity (PI) insurance can help protect a business against claims arising from alleged errors, omissions or negligent advice in its professional services. Subject to the policy, it can cover compensation and the costs of defending an insured claim, including allegations that are ultimately unsuccessful.

Cover needs to reflect your actual activities. A broad occupation label may not adequately describe specialist advice, additional services or work undertaken by contractors. We help present your business to insurers and compare the terms offered.

Professional indemnity for your sector

Accountants, bookkeepers and tax professionals

Accounting practices may provide bookkeeping, BAS and tax services, financial reporting, audit, management accounting and business advisory work. Each activity should be accurately disclosed. For example, a client might allege financial loss following an error in a report, a missed lodgement or incorrect advice.

Our insurance review considers your mix of services, client industries, fee income and specialist activities such as SMSF work, insolvency, valuations or financial advice. These activities may need specific insurer acceptance or a different policy.

Finance professionals, mortgage brokers and financial advisers

Finance businesses have different exposures depending on whether they arrange loans, provide financial advice, undertake financial modelling or manage investments. Potential allegations include an error in an application, unsuitable advice or an omission in a financial analysis.

Consider the products and services involved, representative arrangements, client profile and any specialist activities. Financial advice and investment services may require a dedicated financial services or financial institutions PI wording rather than a general consultants policy. Insurer appetite and exclusions vary.

Property managers, real estate agents and property consultants

Property professionals may face allegations arising from tenancy administration, inspections, communications, reporting or advice to owners and clients. An example is a claim that an administrative omission caused a landlord financial loss.

Businesses should consider residential and commercial property management, sales, leasing, buyer advocacy and property consultancy activities. Valuations, development consultancy and other specialist services should be separately identified for the insurer. Cover for one property activity does not automatically include every other service.

Business, management and specialist consultants

Consultants can face claims involving recommendations, reports, project deliverables or implementation services. Relevant businesses include management, HR, recruitment, marketing, procurement and other specialist consultancies.

Consider whether your work is advisory, operational or a combination, along with project values, client sectors and subcontracted services. For example, a client may allege that an inaccurate forecast or recommendation contributed to financial loss. These examples illustrate potential exposures; they do not confirm insurance cover.

Engineering professional indemnity insurance

Engineering PI insurance addresses claims arising from the professional services an engineering firm provides. Relevant activities may include civil, structural, mechanical and electrical engineering, design, calculations, specifications, technical reports, inspections and project supervision, where accepted by the insurer.

Potential claims include allegations that a design error, incorrect specification or omission in a report caused financial loss or property damage. The services declared to the insurer should reflect your actual work, including specialist projects and any construction or installation involvement.

Consider the following:

• Your engineering disciplines, project types and construction values
• Design, inspection, certification and supervision activities
• Your firm’s liability arising from subcontracted professional services
• Policy treatment of bodily injury, property damage and rectification costs arising from professional errors
• Restrictions affecting cladding, fire safety, pollution, cost estimates or other specialist exposures
• Defence costs, retroactive cover and work completed on earlier projects

Cover is subject to the wording and insurer acceptance. Read more about insurance for engineering professionals →

Design and construction professional indemnity (D&C PI)

D&C PI is designed for businesses that undertake construction work and also provide, coordinate or accept responsibility for professional design and related services. This can include builders, civil contractors, fit-out contractors and specialist installation businesses, depending on their activities and insurer appetite.

Professional services may be performed by your own team or outsourced to engineers and other consultants. A consultant’s PI policy should not be assumed to cover your business’s own liability. Businesses should consider how the proposed D&C wording addresses professional services undertaken on your behalf.

For example, a claim might allege that an incorrect design or specification led to remedial work or a client’s financial loss. Whether compensation, defence costs or mitigation expenses are covered depends on the particular policy and the circumstances.

Our insurance review considers the scope of design responsibility, project sizes, subcontracted design, insured services, limits and exclusions. Where a policy offers mitigation or rectification extensions, you should consider their sublimits, timing and insurer-consent requirements.

D&C PI does not automatically cover defective workmanship or every cost of correcting a project. It addresses professional services exposures and should be reviewed alongside the business’s public liability and contract works arrangements. Contractual guarantees and performance obligations may also be restricted or excluded. Speak to our experienced brokers for advice on the insurance cover available.

Policy features to consider

• Insured entities and services: who is insured and whether the description reflects current and previous professional work.
• Limits and excess: the amount available for each claim and in total, and the contribution payable by your business.
• Defence costs: whether these reduce the limit or are payable in addition, and the conditions for insurer consent.
• Retroactive date: how the policy treats work performed before the current period.
• Contractors and former staff: the extent of cover for your firm’s liability arising from their work.
• Territory and jurisdiction: restrictions affecting overseas clients, services or proceedings.
• Extensions and exclusions: any sublimits or restrictions affecting your activities, including specialist services and liabilities assumed under contracts.

Some policies offer extensions for matters such as defamation, loss of documents or inquiry representation costs. Availability, conditions and sublimits must be checked in the particular wording.

Claims notification and continuity of cover

PI policies are generally written on a claims-made basis, commonly requiring claims to be first made and notified within the policy period. The policy’s notification provisions matter, including how it deals with circumstances that could lead to a claim. Contact us promptly if you receive a claim or become aware of a potential issue.

At renewal or when changing insurers, to consider prior-matter exclusions, the retroactive date and any continuity provisions. A new policy should not be assumed to cover an existing claim or a known circumstance.

Run-off cover when your services end

A claim may arise after retirement, the sale of a practice or completion of consulting work. Run-off PI insurance can provide cover for claims arising from earlier services, subject to its terms. Discuss the options before cancelling cover or closing the business.

Choosing a limit and reviewing your premium

Consider the potential size of a claim, your services, client exposures, fee income and requested insurance limits. Revenue alone does not determine an appropriate limit. Premiums also depend on claims history, specialist activities, the excess and insurer assessment.

Where a client specifies insurance requirements, we can compare those requirements with available PI cover. Relevant insurance considerations include policy terms and policy response.

Request a professional indemnity insurance quotation

Whether you are starting a practice, renewing cover or adding a service, speak with Mercantile Insurance Brokers about your professional indemnity options. We can explain material differences between quotations and help you understand the cover offered.

Request a professional indemnity insurance quotation →

This page provides general insurance information and does not take account of your objectives, financial situation or needs. Cover is subject to insurer acceptance and the policy terms, conditions, exclusions, limits and excesses. Read the relevant policy wording and any applicable Product Disclosure Statement before deciding.