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What Professional Indemnity Insurance Covers
Professional indemnity insurance covers businesses and professionals against legal liability from claims of negligence, errors, omissions or breach of professional duty in the services and advice they provide.
The policy pays compensation claims, legal defence costs, investigation expenses and associated losses. That funding is what lets an adviser, designer, consultant or specialist provider keep working while a client dispute is resolved.
If you give advice, prepare reports, design solutions, manage projects or deliver professional services, professional indemnity insurance is a fundamental protection for many Australian professions. Directors of those firms often add management liability insurance. It sits within our business insurance range at Fortis Risk Solutions. Licensed estate agents are one example: see our real estate agency insurance page for how the professional indemnity requirement works alongside the rest of an agency package.
Professional Indemnity Insurance: Cover Sections and Benefits
What Professional Indemnity Insurance does not cover
Professional indemnity insurance answers claims about your advice, your design or the professional service you sold. It does not stand behind everything a client is unhappy about. Common exclusions:
- Matters you knew about before the policy started, including circumstances you did not disclose
- Deliberate dishonesty or fraud by the insured, once established
- Guarantees and warranties of a result that the law would not otherwise impose
- Trading debts, refunds of your own fees and the cost of redoing the work
- Injury and property damage, which belong on public liability
- Claims between related entities, or a director suing their own company
- Work outside the professional services described in the schedule, or outside the territory stated
FRS checks that definition of professional services against the engagements you actually take on, because the wording decides what is insured, not the brochure.
How Professional Indemnity Insurance premiums are set
Professional indemnity insurance is written on a claims made basis, so insurers price the work you do now and the work still sitting behind you. Some occupations must hold it as a licence condition, including Victorian estate agencies. Factors:
- Fee income for the past year, and how it splits across the services you offer
- The profession itself, since building design and financial advice are rated above bookkeeping
- The limit of indemnity, and whether a licence, a client or a professional body sets it
- The retroactive date, and how many years of past work sit inside the policy
- Claims and circumstances notified in earlier years
- The contracts you sign, whether your own terms of engagement or a client contract with uncapped liability
- Project size, and the largest single job you took on in the year
Written terms of engagement with a liability cap are the cheapest risk control available. FRS reviews what you sign, since underwriters price the contracts as closely as the work.
How to claim on Professional Indemnity Insurance
The policy responds to claims made and notified during the period, so timing matters more here than on any other cover. Notify a circumstance even before a formal claim arrives, or the next insurer will exclude it. The FRS process:
- Tell FRS the moment a client threatens a claim, or a complaint suggests one is coming
- Do not admit fault, offer free rework or waive fees, since any of that can read as an admission
- Keep the file intact, including drafts, emails and file notes, and add nothing to it after the event
- Send any letter of demand or court document to us straight away, unanswered
- FRS notifies the insurer inside the policy period and briefs the panel solicitor
- The defence and any settlement are managed with you, and the notification is recorded for renewal
Notification details sit on our make a claim page.
Professional Indemnity Insurance compared with Public Liability
| Question | Professional indemnity | Public liability |
|---|---|---|
| What it covers | Financial loss caused by your advice, design or service | Injury to other people and damage to their property |
| Who buys it | Consultants, designers, agents, accountants and licensed advisers | Trades, retailers, hospitality and anyone the public visits |
| Typical trigger | A client says your work cost them money and demands compensation | Someone is hurt or their property is damaged by your operations |
| Basis of cover | Claims made and notified during the policy period | Events happening during the policy period |
The claims made basis is the difference that catches people out. Cancel the policy and the past work loses its protection, which is why run off cover matters when a firm closes or is sold. FRS keeps the retroactive date intact at every renewal and quotes public liability alongside it where site work is involved.
Professional Indemnity Insurance FAQs
It is mandatory for many professions in Australia, including financial advisers, engineers, architects and other licensed or regulated professionals. Even where the law does not require it, professional bodies, client contracts and engagement agreements often do.
Professional indemnity insurance covers financial loss caused by your advice, design or professional services, for example incorrect advice that costs a client money. By contrast, public liability insurance covers injury to third parties or damage to their property, for example a client hurt at your office. Most professional businesses hold both.
Possibly. If you have held professional indemnity insurance continuously, the policy can include retroactive cover for claims arising from work you did in earlier years.
Yes. The policy generally covers claims arising from negligent acts, errors or omissions by employees, directors or contractors acting for the insured business.
Professional indemnity policies differ in wording, exclusions, retroactive dates and claim conditions, not only in premium. As your broker, FRS helps you:
- Define and disclose your professional services clearly
- Structure limits, excesses and retroactive cover
- Compare policy wordings beyond headline pricing
- Negotiate extensions and manage insurer requirements
- Act as your advocate if a claim or investigation arises
Firms that hold client data should also review how the policy sits beside their cyber insurance.