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5 things you may not know about Professional Indemnity Insurance

Written by

Shaun McGowan

You work so hard on your business and you want to protect it. But you’re a savvy businessperson and you don’t want to waste that hard-earned money on unnecessary expenses.

So you’re wondering - do you really need professional indemnity insurance (PII)? You’re highly skilled, you operate with integrity and you give great service to your clients. It’s pretty unlikely you’ll make a mistake – so why bother spending the money?

If you’re weighing up whether PII is a worthwhile investment for your business, here are 5 things you really need to know.

1. You could miss out on business if you don’t have it

Many clients, especially in the charitable and government sectors, are simply not allowed to do business with contractors who do not have PII. Others companies may also choose not to do business with you if you don’t have it. The reason for this is that professional indemnity insurance doesn’t just protect you – it also protects your clients.

How? Well, if you do happen to make a mistake and cause them financial damage, they may rely on compensation from you to keep operating. But if you do not have the resources to pay that compensation then their business could suffer, or even go under.

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2. You can do everything right and still face a negligence claim.

You’re a qualified professional with knowledge your clients do not have, so they have a legal right under Australian common law to rely on your advice. Clients also have a right to expect you to deliver your services to a professional standard.

If a client loses money or business as a result of a service you’ve provided, or advice you have given, they can sue you to recover their losses. The problem is, your work is intangible, so it can be very hard to establish exactly what the outcome of your advice has been, or what might have happened if you had not been consulted. This means that whether or not your advice really has caused the loss, a client may still BELIEVE that you are responsible and take action against you.

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3. Your reputation may depend on it

There’s no smoke without fire, right? Many people believe that, so if someone were to file an UNJUSTIFIED negligence claim against you, your reputation (and therefore your business) could suffer considerable harm. Which makes it vital that you protect your name by defending the claim and proving your innocence.

But your legal defence could cost you thousands – unless you have the protection of PII, which covers legal expenses even if a claim is unfounded.


4. You could risk your home if you don’t have it

Even if you are trading through a limited liability company, you can still be personally sued for compensation if you are found guilty of professional negligence. You could face tens of thousands in legal costs and damages payments, so all your personal assets, including your home, could be at risk.

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5. It’s for all types of business

From one-man start-ups to multinational corporations, indemnity insurance is a crucial line of defence. Small businesses are at risk because they usually don’t have the resources to defend a negligence claim. More established businesses face ever-increasing risks of error or misjudgement as the number of clients, transactions and team members grows.

From architects to accountants, photographers to psychologists, PII protects any service or advice based business from these serious risks.

Professional indemnity insurance is one of the most important investments you can make in your business. For just a few hundred dollars a year in premiums you could save yourself from having to pay tens or even hundreds of thousands of dollars should you ever face a negligence claim.

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About the Author

Shaun McGowan from



Shaun McGowan

Shaun is the founder of and is determined to help people pay as little as possible for financial products. Through education and building world class technology. Previously Shaun co-founded and Lend.


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