Compensation for this post was provided by ProfessionalIndemnityInsurance.com.au. Opinions expressed here are my own.
When you’re running a small business, there’s so much to think about. Professional Indemnity Insurance may not be high on your priority list. But it should be.
From the moment you start providing advice or performing a service, you could be at risk from a negligence claim – and the consequences could be devastating. Between legal costs and the settlement, you could face a five- or even six-figure sum, not to mention the damage to your business and personal reputation.
What is professional indemnity insurance for?
Under Australian law, clients are entitled to rely on you as a qualified professional to:
- Give them accurate and appropriate advice
- Deliver the services you’re contracted to provide
- Safeguard their private data.
If you fail in any of these obligations, clients can file a professional negligence claim against you, to recover any financial losses they’ve experienced as a result.
PI insurance covers the costs of your legal defence and any damages you have to pay, up to the limit of your cover.
Here are the top three ways your professional indemnity insurance could save you from disaster
1. If you or an employee make a mistake
You’re a qualified professional and you know what you’re doing. You only employ skilled people and you have complete faith in your team. So why should you bother with PI insurance?
But sometimes, mistakes happen – and even the most innocent error could result in major financial loss. What if you accidentally attach the wrong file to an email, sending commercially sensitive information about a client to one of their competitors?
Or if you advise a client based on information they’ve given you, which later turns out to be wrong? Many professionals, such as auditors, have a legal duty of care to check that the information they’re relying on is correct.
2. If a client believes you’ve made a mistake
As a service- or advice-based business, the very nature of your work is intangible. It can be difficult to track the exact outcomes of the work you do, and even harder to prove them.
So if something goes wrong after they’ve used your services, clients may decide you are to blame. Whether or not their claim is justified, they can take legal action against you.
It’s vital that you defend that claim to avoid serious damage to your reputation. PI insurance will give you the resources you need to mount a legal defence, even if the claim is later dropped or dismissed in court.
3. Your client data is lost or stolen
For any business that holds personal or confidential data about clients, cyber security is a huge deal. Every few days there are reports of hacks and leaks affecting all kinds of businesses, and of catastrophic new viruses sweeping the Net.
Whilst a small service business is of course unlikely to attract the attention of big league hackers and activists, there’s still an ongoing risk of a breach in your physical or cyber security.
For more information, please visit www. ProfessionalIndemnityInsurance .com.au