Professional indemnity insurance vs public liability
The difference between public liability and professional indemnity insurance is that:
Public liability is designed to respond to claims made by members of the public for injury, illness or damage.
Professional indemnity covers legal costs and compensation from claims made by clients for professional mistakes or negligence.
It is often mistakingly believed that professional indemnity and public liability insurance are only available to companies. In fact a freelancer, sole trader or someone working in a professional capacity as a volunteer can buy those covers.
How does professional indemnity insurance work?
Professional indemnity will protect from you from accusations of making a costly mistake, giving wrong advice, being negligent or failing your duty of care.
In other words the services you offer to solve your clients' challenges is the subject of this insurance cover.
However, PI cover will not respond to accidental injuries or property damage if your business or you are deemed at fault. That is what public liability is for.
How does public liability insurance work?
Public liability is designed to respond to claims of causing an injury or property damage.
These claims can come from your own customers and clients. But suppliers or passers-by can also try to claim compensation.
Most self employed individuals and businesses that have a regular physical contact with those parties have a need for this cover which provide legal defence and pay for compensation.
Which cover do I need?
It isn't so much about public liability vs professional indemnity. You may need both, depending on your business activities.
As we explained above those covers are designed for difference types of legal claims and sometimes it's best to have both.
Many businesses and self-employed professionals believe that doing their best will protect them from any such claims.
Unfortunately our best sometimes isn't good enough. Having public liability and professional indemnity insurance can offer peace of mind that if something doesn't go according to plan, you can turn to someone for help.
Don’t stop reading yet!
Not all claims of causing an injury or property damage fall under public liability insurance.
An injury, property damage or even death can be caused by bad advice.
Let’s take Mike, a martial arts instructor, as an example. He found out some time ago that public liability insurance doesn’t cover certain scenarios.
One of his students decided to practise a newly learnt technique on his flatmate at home. Unfortunately, by doing so the student caused a concussion to the flatmate.
The flatmate asked for her medical costs to be paid. In response the student decided to blame Mike for not explaining properly the consequence of using the technique in full force.
Luckily for Mike, the flatmate dropped the case but it prompted Mike to review his insurance policy and add professional indemnity to his cover.
Points to remember
- If your professional advice could cause an injury or property damage, check that your professional indemnity covers these risks.
- You’re only covered if you have an active professional indemnity insurance at the time a claim is made against you. In other words if you cancel your professional indemnity insurance, you are no longer covered even if at the time of delivering work for a client you were insured.
- Professional indemnity insurance can cover your past work as well. Make sure you specify the required retroactive date when arranging your cover.
