As a small business owner, you’ll likely know just how tough it is to keep everything moving smoothly to ensure that your company stays afloat. Challenges can come in all shapes and sizes, from a lack of customers to claims being made against you, which is why it comes as no surprise that roughly 20% of businesses fail within their first two years.
However, some of the risks that you may face can be mitigated through proper preparation; one of the most sensible precautions that you can take is having professional indemnity insurance. If you’re not sure what that is and whether or why you might need it, we’re here to help. Read on to find out everything that you need to know about professional indemnity insurance as a small business owner.
What is it?
If your business offers a service or advice to clients, and due to whatever circumstances that ends up negatively impacting a client’s health or financial wellbeing, then they may decide to bring forward a case against you. This can result in a hefty financial cost in legal fees and payouts if you’re found liable. It’s why you might want to look into the possibility of taking out professional indemnity insurance, as it’s designed to help to cover some of those costs.
When might it be needed
There are a range of circumstances in which this kind of insurance can help your small business. Some of the most common occurrences that can lead to claims include:
- Errors or negligence
- Poor advice/failure to meet your client’s reasonable expectations
- Data and confidentiality breaches
Who needs it
Although professional indemnity insurance is not a legal requirement, you’ll find that many small businesses choose to take it out for its protective value. That’s why the industry was estimated to be worth around £2.9 billion as of 2021. Some sectors that may find this kind of insurance useful include:
- Accountancy
- Finance
- Interior design companies
- Architects
- Healthcare experts
- Chartered surveyors
- Marketing and advertising
- Business consultancy
What other factors should you consider before choosing professional indemnity insurance?
Choosing this insurance may be well worth it for larger businesses but, if your small business is just taking off, then it could be another cost that you can’t afford right now. However, here are some other reasons why you might consider getting it:
- Whether you need it to win over clients
- How at risk your business is to claims
- Whether you need it contractually