Who Needs Professional Indemnity Insurance In Australia?

If you run a business in Australia, chances are you’ve heard of professional indemnity insurance. But do you really need it? The answer, as with most things in the world of insurance, is “it depends.” In this blog post, we’ll take a look at who needs professional indemnity insurance by law, who should consider taking out a policy and when it might be a good idea to do so.

Professional Indemnity Insurance Explained

So, what exactly is professional indemnity insurance? In its simplest form, it’s a type of insurance policy that provides coverage for professionals who are legally liable for reasonable errors or omissions they make while providing their services to clients. An active policy can cover the cost of defending against and compensating your client if they do decide to sue you, which is why it’s especially important for those in professional services.

An example of this would be a situation where an accountant provides incorrect tax advice to a client, resulting in negative financial implications. In this case, having professional indemnity insurance would typically cover damages, legal fees, and other costs associated with the dispute.

Who Legally Requires A Policy

In Australia, all individuals and businesses providing professional advice or services should consider obtaining professional indemnity insurance. However, there are several roles that are legally required to take out a policy. These include but are not limited to: 

  • Architects 
  • Accountants 
  • Company Auditors 
  • Designers 
  • Engineers 
  • Immigration Agents 
  • Insurance Brokers 
  • Land Surveyors 

Who Else Should Consider This Insurance

Aside from those professions where indemnity insurance is required, there are many other roles which may benefit from taking out a policy. For instance, if you are a consultant providing business advice, or if you run an IT services company, taking out professional indemnity insurance is a wise move to protect your business. As a rule of thumb, if you provide a service that could reasonably result in financial loss to someone else, it’s worth considering taking out a professional indemnity insurance policy.

When You Might Not Need Professional Indemnity Insurance

There are also plenty of instances when you might not need professional indemnity insurance. For example, if your business only sells products and doesn’t provide any type of advice or service, then you typically won’t need it.

Another instance when you might not need professional indemnity insurance is if you already have another type of policy that provides coverage for the same risks, such as general liability insurance. It’s always a good idea to speak with your insurance broker to see if you really need professional indemnity insurance or if another type of policy would better suit your business activities.

When To Take Out A Policy

Ideally, you should take out a professional indemnity insurance policy when you first start a business. However, the timing of when you should take out a policy is not set in stone and depends on your circumstances.

For instance, if you’re just starting out as an independent contractor or freelancer, it might make sense to wait until you’ve built up enough of a client base and revenue before getting insured. On the other hand, if you’re taking on bigger projects and assuming more risk, it might be worth considering sooner rather than later.

What Doesn't Professional Indemnity Insurance Cover?

It’s important to note that professional indemnity insurance typically doesn’t cover criminal activities, fraud, or any type of intentional neglect or breach of duty. Furthermore, most policies will not cover any fines or penalties imposed by a regulatory authority.

As with any insurance, it’s important to read the fine print of your policy and speak with your insurance broker to make sure you are aware of what is and isn’t covered under a particular policy.

In Summary, Do You Need Indemnity Insurance?

Professional indemnity insurance can help protect your business if a client sues you for negligence or breach of duty from advice or services you have provided. Whilst it’s legally required for many industries, it can also be beneficial for others.

To determine if it’s right for you and your business, speak with an insurance broker who can best advise you on the right policy to suit your needs. At Coast & Country Insurance Consultants, we can find coverage to protect your business, in addition to providing tailored advice. Contact us today to find out more.


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