Professional indemnity insurance is a great way for businesses to protect themselves from legal claims made against them by former or current clients. This insurance will often protect the company from having to pay legal defense fees, and will often even cover payout judgments. Although not required for all companies, the law does require this type of insurance for those involved in specific business fields. Even if not required, though, all businesses would be wise to consider investing in this form of insurance as it can protect both the finances and reputation of the company.

Professional indemnity insurance is also an excellent way to protect the company from mistakes made by employees. Depending on the level of protection a company chooses, the company may be protected from claims ranging from simple negligence to more serious breaches of intellectual property rights. A company may even go as far as to request protection from serious mistakes such as loss or damage of their clients’ confidential financial records. Generally, doctors and lawyers comprise the professions that most often carry professional indemnity insurance due to their unfettered access to clients’ confidential information. Because the risk of lawsuits in both of these professions is high, these groups often pay a hefty premium for such protection. However, the price paid for the assurance that these businesses are protected justifies the premium costs.

Small business may choose not to invest in this form of insurance initially. If the business does not have a large client base and does not engage in activities that may give rise to liability, such insurance may not be necessary. No matter the business, though, such determinations should be made by each company in its unique position. Business owners should even consider consulting legal counsel before making the final decision on whether or not to protect against professional liability claims. Often, attorneys better understand applicable laws and can better advise business owners on potential liabilities of which the company may otherwise be unaware.

It is important to note that each business will have different needs and goals. Each business owner should determine for himself whether or not such insurance is necessary, but the general consensus in the business community appears to be that virtually any company would be wise to consider this form of protection. Small and large business owners or directors should take a look at becoming professionally insured, and would be wise to consult with an attorney before making the final decision on this important method of protection.