Professional Indemnity Insurance for Limited Company [What It Is & Isn’t]

Professional indemnity insurance for limited company protects a limited company up to the amount of the loss suffered by the third party. It is also called professional liability insurance.

Professional indemnity insurance is a type of liability insurance that protects a business owner or professional from some business-related mistakes. This can range anywhere between making a misjudgment and giving advice that turned out not to be professional.

As a business owner or professional, you need to carry professional indemnity insurance for limited company to protect yourself and the business.

Does a Limited Company Need Professional Indemnity Insurance?

This is one of the common questions. Is there any need for you to carry professional indemnity insurance if you run a limited company?

According to Limited Company Help, you need to carry the policy if you run a limited company. It is because the policy helps in protecting your limited company from financial ruin that comes with court cases and claims.

Who Needs Professional Indemnity Insurance?

We have now ascertained that you need professional indemnity insurance for limited company. But who needs the insurance? What type of professionals need to carry the policy?

Below is a list of some of the professionals that need to carry professional indemnity insurance for limited companies.

  • Limited company owners or people who do business through a limited company.
  • Business and management consultants
  • Interior designers
  • Architects
  • IT contractors, developers, and programmers.
  • Teachers/coaches/tutors
  • Freelancers
  • Solicitors
  • Fitness professionals, such as yoga instructors and personal trainers.
  • Social workers
  • Recruiters
  • Engineers
  • Web designers
  • Graphic designers
  • Construction workers

Why Do You Need Professional Indemnity Insurance for Limited Company?

Do you fall into any of the categories mentioned above? If so, you are among the groups of persons who are covered by professional indemnity insurance.

But is there are benefit that comes with carrying the policy? Indeed, there are several advantages of holding professional indemnity insurance. Here are a few of them:

1.    Professional Indemnity Insurance Protects You Against Breach of Statutory Duties

Statutory duties refer to the primary duties expected of you in your line of work. For example, if you are an account or consultant, it is expected that you keep the client’s information confidential.

Releasing the information to someone else may lead to a breach of statutory duties. In some cases, you may be sued for a breach of Intellectual Property (IP), whereby you are sued for plagiarism, breaching the use of trademarks and patents.

2.    For Contractual Purposes

Some clients may not be inclined to do business with your limited company if you don’t have professional indemnity insurance for limited company.

Having the coverage means that you are inclined to look after the interests of your clients. They will be more confident to do business with you seeing that you have a policy that can address their claims if need be.

Besides, your landlord may require you to have professional indemnity insurance before taking the property on lease or rent.

3.    Professional Indemnity Insurance Covers the Tort Liabilities

The specifics of the Tort Law are that the interests of the clients must be protected. This includes protecting your clients against defamation and negligence.

Having professional indemnity insurance for limited company proves that you would be ready to pay for damages arising from going against the law.

In that case, your clients may sue the business for damages that result in economic or financial misfortune. The clients may also sue your company if your actions led to their defamations.

4.    Unprofessional Advice

As a consultant, clients would like to have your opinion and professional guidance to navigate some situations. They count on your advice to be reliable.

However, things could go north for different reasons, including changing dynamics in the industry. In that case, your clients may have to bear the brunt. They may also want to sue your business for such unfavorable outcomes.

Having professional indemnity insurance for limited company helps settle the bills arising from such claims.

The other reasons why you need to purchase professional indemnity insurance for limited company are:

  • Protecting your business against lawsuits arising from unsatisfied clients’ reports against the business.
  • Use the policy to defend yourself and the business in a court of law, if sued.
  • If you want to be legally protected for mistakes arising from negligence and alleged mistakes on the part of clients.
  • To save some of the costs of settling a lawsuit after a lawsuit has been filed.

What Does Professional Indemnity Insurance Cover for Limited Company?

What should you expect to cover with the professional indemnity insurance policy? The most popular coverage option is to protect the business against lawsuits.

However, your limited company can be covered in so many ways, including:

Professional Negligence

This means the client’s perception that your inputs aren’t enough and are below par with professionalism.

The negligence also arises when the client feels you have been dishonest with the work you did for him or her.

Breach of Contract

This is pretty straightforward. Breach of Contract in professional indemnity insurance means that you didn’t keep to your part of the bargain.

It could be failing to show up at a scheduled meeting with a client. It can also be when you fail to deliver the exact services your limited company was paid to do.

Defamation of Character

Your client may also file a lawsuit against you and the limited company if he or she feels you defamed them. The defamation can come in different ways, such as:

  • Causing emotional distress to the client.
  • Libel
  • Slander

Copyright Breach

This type of professional indemnity coverage is triggered when you are sued for plagiarizing your client or someone else’s work.

Copyright breach means that you (the professional) or the limited company you are affiliated with is guilty of copying someone’s work.

Poor Professional Advice

The client relies on the information or advice you gave to make a decision. At the end of the day, the client got into problems because of your advice, the information you shared, or the recommendation you made.

It leads to poor professional advice and you can be sued for that!

Conclusion: Having Professional Indemnity Insurance is Required for Limited Companies

Having professional indemnity insurance isn’t a legal requirement, but it comes in handy on several occasions. From getting sued to be claimed against, you need the coverage to be safer.

Professional liability insurance does not only protect you as a professional but also protects your limited company. Determine how much professional indemnity insurance you need by evaluating your type of business, the risks associated with handling customer data, and the size of the company.

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