What is professional indemnity?

Many professionals are giving advice or offering a service to their clients for a fee. In some cases, the advice which is offered does not help the client due to a number of reasons, like incomplete information or changed circumstances. In this case, the client may initiate legal action against the professional for the losses which he has suffered because of the advice and demand compensation. This can be expensive for the professional if he has not taken suitable insurance. Some new professionals would ask what is professional indemnity insurance, hence more details are provided.


Often the advice or service which a professional offers depends to a great extent on the information available to the professional,it may not be relevant after some time, or the business or other conditions may have changed. Hence the client may suffer from a loss or injuries and may initiate legal action against the professional to get compensation for the losses. It is usually expensive for a professional to defend himself against the lawsuit, since he has to pay legal fees and also it may affect the reputation of the professional, especially if the judgement favors the client.


Hence it is advisable to purchase insurance against professional indemnity at the earliest. The insurance will help to pay the legal fees for any compensation case. Additionally if any compensation has to be paid to the client who has filed the case, the insurance company will pay the compensation on behalf of the professional. The insurance policy should also cover the claims due to the action of the partners in the business and employees. Many businesses reject some clients because they are worried, that they may face legal cases later. Purchasing insurance for professional indemnity insurance in Australia, gives the professional the confidence to run his business, without worrying about legal cases by his clients.