Protecting your service- or advice-based business is vital for your company’s longevity. But tackling the murky insurance world on your own can feel daunting. So, let our dedicated team at LiabilityCover help you out. We work with the country’s best insurance brokers and agents to help you access the comprehensive coverage necessary for long-term success.
In the following sections, we’ll explore professional indemnity insurance in-depth to help clear any confusion and secure your business’s future.
What Is Professional Indemnity Insurance Coverage?
Professional indemnity insurance, also known as professional liability insurance, errors and omissions insurance, or malpractice insurance, can protect you from third-party claims of omissions and errors in your service. Depending on your policy specifics, it also covers negligence and failure to deliver a service as advertised.
The damages covered can be financial (normally the case with mortgage brokers and investment consultants) or physical (typically the case with dentists and physiotherapists).
Real-World Professional Indemnity Insurance Claims Examples
Gain a deeper understanding of the benefits of this business insurance type with these real-world claims examples:
Example One: Bodily Injury Claim
You are a physical therapist. Your client, Sam, needs help rehabilitating his knee after an injury.
After a consultation, you recommend a few new stretches to ease their pain. But unfortunately, the stretches end up worsening the injury.
Sam successfully sues you for bodily injury. Fortunately, your professional indemnity insurance pays the medical and legal fees, totalling $5,000.
Example Two: Negligence Claim
You are a communications technician. While installing your customer’s brand-new aerial write in their backyard, you fail to see it’s positioned over a little pond.
A windy spell a few days later sends the aerial flying into the pond, electrocuting your customer’s exotic fish.
As expected, your client sues you for negligence. Luckily, you purchased professional indemnity insurance, which covers the cost of the aerial wire and the fish, equalling $15,000.
Example Three: Failure to Deliver a Service as Promised Claim
As a marketing project manager, you were hired to plan a commercial for your client’s latest product launch. The commercial is ready to go for Black Friday. However, a mistake in your scheduling makes the release late, missing the all-important shopping period.
Due to your failure to deliver as promised, your client sues you. Thankfully, your professional indemnity insurance covers both the legal and settlement fees, equalling $190,000.
Example Four: Professional Negligence Claim
You are a graphic designer hired to produce price tags that fit around the trunk of Christmas trees. The final product must stay secure while the tree grows and withstand all weather.
Unfortunately, after a few rainstorms, it became apparent that the price tags were not up to scratch. The ink ran, making them totally illegible.
Due to your oversight, your client lost money. Therefore, they decide to sue you for negligence. Thankfully, your professional indemnity insurance policy covered the compensation and legal costs, equalling $5,000.
What Does Professional Indemnity Insurance Cover?
While the policy specifics can change slightly depending on your specific business, most professional indemnity insurance coverage includes the following:
- Monetary losses caused by poor advice
- Financial losses due to negligence
- Unintentional breaches of copyright
- Losses of documents or data
- Errors in your service or professional negligence
What Doesn’t Professional Indemnity Insurance Cover?
Professional indemnity insurance protects from claims of bodily injury, property damage, or financial loss due to a service you provided or negligence.
Below you can find examples of what isn’t covered by this policy:
- Violation of securities acts
- Wrongful acts
- Intentional acts
- Fraudulent acts
- Criminal or dishonest acts
- Cost guarantees or price estimates
- Incorrect estimates of economic returns or profits
How Much Does Professional Indemnity Insurance Coverage Cost?
For a standard professional indemnity insurance policy with a limit of $100,000, you should expect to spend around $250 per year. However, several factors influence the price of your premium, including but not limited to the following:
- Your insurance claims history — As a business with a long track record of making insurance claims, you can anticipate higher premiums than a business with a clean insurance claims record.
- Your years of experience — Insurers believe that the longer you work in your industry, the lower your likelihood of making mistakes. As a result, you receive lower insurance premiums than start-up businesses.
- The number of staff working for your business — The more employees, the higher your premiums. Why? Because there is more chance of somebody making a mistake and, therefore, experiencing lawsuits.
- Your employees’ experience and training — Alongside the number of employees you have, their experience and qualifications play a part in your insurance price. The more experienced your staff, the lower your professional indemnity insurance premiums.
- Your annual and forecasted revenue — While turning a high profit is a clear indicator of business success, it establishes you have more at stake during a lawsuit. Claimants will request more in damages from businesses with larger revenues, so expect to pay a higher premium as a profitable company.
Who Requires Professional Indemnity Insurance Coverage?
Any business that offers advice, provides a service, or designs devices should purchase a professional indemnity insurance policy. Some industries, like law professionals, medical practitioners, and accountants, mandate this coverage.
But even for professions without the requirement, it’s still highly recommended as a risk management tool. In some cases, it may help you win new contracts.
We’ve helped countless professionals access the professional indemnity insurance coverage they need, including:
- Design consultants
- Sports and fitness instructors, like personal trainers
- Graphic designers
- Recruitment and employment professionals
- IT, marketing, and business consultants
When Do You Need Professional Indemnity Insurance Coverage?
As briefly touched upon, professional indemnity insurance isn’t legally required by all professionals who provide services. However, we typically suggest coverage for individuals and companies offering consulting and advice for a fee because it protects against consequent lawsuits.
As a general rule, you should consider professional indemnity insurance coverage if the following applies:
- You work as a consultant, self-employed professional, freelancer, or contractor, and your client wants proof of professional indemnity insurance.
- You provide services or advice to your clients, such as contracting and consulting.
- You provide designs to your customers as an engineer, architect, graphic designer, or similar professional.
- Your regulatory or association body mandates the coverage.
- You need to protect against negligence or mistakes in your work.
Consult your trade-specific or provincial regulatory body to determine whether your profession legally requires this type of insurance.
Why Choose LiabilityCover?
Tackling the insurance world on your own leaves you with countless quotes providing various coverage levels and price ranges. The myriad of complexities makes the process overwhelming and confusing.
So, let us help!
Our dedicated team works tirelessly to connect you with the country’s leading and licensed insurers. After filling in the simple online request form, we analyze your insurance requirements to accurately provide quotes and assign brokers with industry-specific experience.
We make insurance straightforward for businesses and individual professionals across Canada.
Frequently Asked Questions
How Do You Get Professional Indemnity Insurance Coverage in Canada?
With LiabilityCover, acquiring the professional indemnity insurance coverage you need is as easy as these four steps:
- Complete our short online inquiry form.
- Our team analyzes your insurance requirements.
- We connect you to a leading licensed insurance provider with experience covering other businesses like yours.
- Your designated brokerage or agent contacts you to guide you through the process.
Do You Need to Get Malpractice Insurance As Well As Professional Indemnity Insurance?
You don’t need to purchase both policies because they provide the same coverage. Generally speaking, malpractice insurance is the term used to describe professional indemnity insurance for medical and health professionals.
What Is The Difference Between Professional Liability Insurance and Professional Indemnity Insurance?
There isn’t a difference between professional liability insurance and professional indemnity in Canada. The latter term is simply more popular overseas.
Does Professional Indemnity Insurance Offer Coverage for Tools Used For Work?
Professional indemnity insurance covers third-party losses caused by omissions and errors in your service or advice. Therefore, it won’t protect your work-related tools or equipment.
If your business uses expensive items to complete projects, you should consider purchasing tools and equipment coverage.
Is Professional Indemnity Insurance On Its Own Enough?
It’s doubtful that professional indemnity insurance on its own is sufficient to establish a complete protection plan. Therefore, you should think about purchasing a few of these additional policies:
- Commercial general liability insurance coverage — CGL provides financial coverage for third-party property damage and bodily injuring caused by negligence or unexpected events. Generally, it covers the compensatory costs and legal defence expenses, regardless of the lawsuit’s outcome. If you interact with third parties (i.e., vendors, suppliers, customers, other businesses, the public), you should purchase a commercial general liability insurance policy. Note: It also covers food and beverages.
- Product liability insurance coverage — Product liability insurance covers the legal costs related to lawsuits of bodily injury or property damage caused by a product you sell, manufacture, or distribute. The coverage is essential if you offer products in addition to your services. The most common situations covered under this policy are as follows:
- Sickness from your food or beverages
- Products that physically hurt a customer
- Products that damaged a customer’s belongings or home
- Cyber liability insurance coverage — Compared to the other policies, this one is relatively new to the game. It covers financial losses sustained from cyber events like data breaches and attacks. The coverage is customizable to suit your business type and size. But generally, the protected areas are:
- Incident response
- Legal, forensic, and breach management
- System business interruption
- Cyber extortion
- Identity theft
- Reputation recovery
- System damage and restoration
- Directors and officers insurance coverage — Otherwise known as management liability insurance, the policy covers the fees associated with legal defence, losses, and indemnification against a director or officer of your company. Non-profit, for-profit, private, and public corporations benefit from the insurance. The general coverage areas are:
- Allegations of misrepresentation and negligence
- Mergers and acquisitions
- Employee discrimination claims
- Wrongful dismissals
- Corporate manslaughter
- Insolvencies and divestitures
- Inaccurate disclosure
- Misleading statements
- Commercial auto insurance coverage — Sometimes known as commercial vehicle insurance, the policy covers any vehicle used for work reasons (including vans, trailers, cars, and trucks). Any vehicle carrying goods, people, equipment, materials, or tools should have sufficient coverage. It’s a common misconception that personal policies protect against work-related driving. In reality, personal insurance excludes accidents occurring while driving for business.
- Commercial property insurance coverage — Commercial property insurance provides financial coverage for the loss or damage to your business property and its contents due to an insured peril (for example, fires, thefts, and vandalism). The coverage range is wonderfully broad, as you’ll see from the list below:
- Business interruption
- Employee possessions
- Building coverage
- Electronics and inventory
- Immovable tenant improvements
- Equipment, fixtures, and furnishings
- Business interruption insurance coverage — The policy reimburses any income lost due to a covered property peril. Generally speaking, it’s automatically included in your commercial property insurance (although we advise checking with your broker). Depending on your policy, business interruption insurance covers these expenses:
- Lost revenue
- Overhead costs, including mortgage payments and electricity bills
- Costs of moving to a temporary business location
- Employees’ wages and payroll
- Telephone and internet connections
- Loan repayments and taxes if they’re due throughout the covered period
- Builder’s risk insurance coverage — Otherwise known as course of construction insurance, it protects the building and your liability during a project. Usually, property owners buy the policy, but it’s best to establish this responsibility during the contract write-up phase. The types of projects typically requiring a COC policy include:
- Road building
- Adding an extension or second story to an existing building
- Building commercial and residential new builds
- Constructing custom homes
- Legal expense insurance coverage — LEI is designed to cover your legal costs during common business disputes. It ensures you have access to experienced legal advice when dealing with run-of-the-mill problems. While the policy’s specifics change, you can expect it to cover the court, lawyer, witness, and reporting fees in these scenarios:
- Auto contract disputes
- Employment disputes
- Property and tax protection
- Statutory license protection
- Bodily injury