What is Professional Indemnity Insurance? 

If you or your business provide professional advice or services, then you’re likely to need Professional Indemnity (PI) Insurance.

This insurance provides and pays your legal defence costs in the event that a customer complains that they followed negligent advice and suffered a financial loss – even if there’s no real basis for the complaint. If there was negligence, PI Insurance will also pay any damages awarded by the court.

Without Professional Indemnity Insurance, you or your business could be faced with having to organise your own legal defence, and pay potentially large legal bills as well as damages awarded by the court. The average claim amount is over $100,000 for legal costs, expert reports, and damages, so it can be a large amount to have to find quickly.

Typical professionals that purchase PI Insurance include:

• real estate agents
• construction consultants
• healthcare or allied health
• IT consultants
• lawyers 
• doctors.

Why is Professional Indemnity Insurance important?

Professional Indemnity Insurance is mandatory for many professions and must be in place before starting a business. It’s recommended that you check with your association or insurance adviser to find out if PI cover is compulsory, and the sum insured required.

For other professionals, although this insurance cover may not be compulsory, it’s an easy way to protect yourself and your business from large financial losses. Even with the best training or risk management, people still make mistakes, contractors can provide incorrect specifications, and advice can be misunderstood.

It’s worth noting that the cover provided by Professional Indemnity is different from Public Liability Insurance which covers defence costs and any damages relating to personal injury caused to people or damage to their property. This is not the same as financial loss caused by an architect placing walls in the wrong location on plans or an IT professional recommending the wrong software.

What does Professional Indemnity Insurance cover?

The exact cover will depend on your occupation and scope of activities. Broadly speaking, Professional Indemnity Insurance covers any negligent act, error or omission relating to:

• misleading, inaccurate or negligent advice; breach of confidentiality or privacy
• breach of consumer, competition, and fair trading laws
• loss of documents
• infringement of intellectual property rights
• malpractice, misdiagnosis, failing to order the appropriate tests, failure to treat
• defamation, libel or slander, including costs of disciplinary proceeding costs, claim investigation and expert reports
• public relations costs
• legal defence costs
• payment of damages.

As you can see, Professional Indemnity is a complex insurance with a wide range of cover options. We’ll work with you to understand your business, provide options to manage your professional risks, and recommend insurance cover.

Frequently Asked Questions

Who needs professional indemnity insurance? 

Anyone who is specially trained, provides advice or service, and is a member of an association or profession can purchase this type of cover. Real estate agents, construction consultants, engineers, healthcare or allied health professionals, designers, lawyers, IT consultants and doctors all need Professional Indemnity Insurance. 

In some workplaces or industries, it is mandatory to have this cover. Even if not compulsory, this insurance is important to protect you and the business from having to pay significant legal costs, as well as damages, if found to be at fault.

How much does professional indemnity insurance cost?  

Professional Indemnity covers you or your business for legal costs and any damages if there is an actual or alleged act, error or omission that causes a financial loss to a client or customer.

Premiums are typically based on:

1. Your industry – for example, construction, IT, or medical, some are at higher risk than others.
2. The scope of your business activities – for example, whether you’re a fire engineer or an IT engineer, the turnover/ revenue and number of employees or contractors.
3. Prior claims experience – the more claims or lawsuits, the higher your premium (and excess) are likely to be.

●    What is the minimum professional indemnity insurance? 

The amount of Professional Indemnity cover you need depends on:

• your occupation and potential for financial loss to the customer if there was negligent advice
• any mandatory requirements of your association
• the level of cover you choose, based on your level of risk, as well as the cost of the insurance.

Because different professions present varying levels of complexity and risk, we recommend talking with your insurance adviser – they are professionals who can work to understand your business and provide you with options to choose from.

What is Worker’s Compensation Insurance? 

Workers’ Compensation Insurance is compulsory for most employers in Australia. It provides cover for your business against the financial costs for weekly compensation or a lump sum benefit in the case of permanent disability. 

Every business and industry has occupational and safety hazards that can result in injury to employees and contractors. Some workplaces have a higher risk of work-related incidents than others, but no matter the size of your business, or the industry or state/territory it’s in, you’re  required by law to have Workers' Compensation Insurance. 

Why is Workers' Compensation Insurance important?

As an employer, Workers' Compensation Insurance is statutory obligatory. This insurance is designed to reimburse the business against weekly wages or lump sums costs if an employee is injured at work.

Workers’ Compensation rules vary between states and territories, so it’s important to check the relevant regulator for exact requirements for your location and industry, and seek professional insurance advice when making your decision.

• Working Directors. Check if you have to include yourself as a working director, as this depends on the state/territory. We also recommend that working directors consider Personal Accident Insurance which has additional benefits not covered under Workers’ Compensation.  
• Contractors. If you employ contractors, some states and territories also require that these people, called ‘deemed workers’, are insured for Workers' Compensation.
• Sole Traders. As a sole trader, it’s unlikely you can get Workers' Compensation Insurance. However, if you can’t work, you’ll still need ongoing income to pay your regular bills, so you should consider Personal Accident, Life, and Sickness Insurance in case you have an accident or permanent disability.

What does Workers' Compensation Insurance cover?

In cases of a work-related illness or injury, Workers' Compensation can reimburse the business for weekly wages, as well as pay the cost of hospital, medical, and rehabilitation expenses.

Examples of work-related injuries include:

• soft-tissue injuries from lifting in warehousing or packing
• cuts, lacerations, and needlestick injuries in medical and allied health
• slips and trips in the retailing or consulting industries
• hearing damage, dust diseases or asbestosis in the construction industry
• fatal incidents such as electrocution, poisoning, falls and being struck by a machine.

There are also exclusions for illness or injuries that happen outside the scope of employment, like driving to or from work
.
We’re ready to assist you in arranging Worker’s Compensation Insurance that meets the statutory requirements in your state or territory.

Frequently Asked Questions

How much does worker’s compensation insurance cost?  

Each state and territory calculates premiums differently. In principle, the annual premium is based on the industry rate, total amount of gross wages paid, and your business’ claims history.

Does your business need worker’s compensation insurance? 

If you have employees, then each state and territory requires that you have Worker’s Compensation Insurance in place before you start operating the business. Employees can be full-time or part-time, and may also include contractors or deemed workers, piece-meal workers and apprentices.

What types of injuries or illnesses are covered by worker’s comp? 

Workers’ Comp covers any injury or illness directly caused at or by the type of work. For example, a needlestick injury may cause hepatitis in a nurse, a scaffolding collapse may cause permanent injuries, quarry workers could develop tinnitus (ringing in the ears) due to excessive workplace noise, or a warehouse worker could injure their back when packing shelves.

Who is exempt from worker’s compensation? 

Workers’ Compensation Insurance covers employees and deemed workers. Business owners or sole traders, as well as independent contractors, usually aren’t insured under Workers' Compensation. If you’re not insured, we recommend that you consider buying Personal Accident Insurance.

What is Liability Insurance? 

Liability Insurance is a general term that covers multiple types of insurance cover that help people and businesses protect themselves from potentially large legal defence costs and any damages awarded by a court. 

The main types are Public & Products Liability, Professional Indemnity, Management Liability, Statutory Liability & Product Recall. These also specialist liability insurance for the aviation, marine, Care and finance industries. 

Why is Liability Insurance important?

Some Liability Insurance is mandatory, which means the government requires you to have it in place to operate the business – like Professional Indemnity for architects or CTP Liability Insurance for registered cars and trucks. Other types are optional, with the scope and amount of insurance cover chosen by the business owner.

Anyone who deals with the public, sells, imports goods, drives a car or truck or operates a plane or boat should have Liability Insurance, which has two main cover sections:

1. Public Liability – injury to the public or damage to their property on the business premises or caused in a truck or boat accident.
2. Product Liability – once the item you sell or repair leaves your control (for example, a plumber installing a washing machine), if it damages or injures someone then you could be legally responsible.

Additional covers include:

• Professional Indemnity – if you provide advice or a service, such as an accountant, care worker or building consultant, you could be legally liable for any advice you provide, which results in external clients or customers being financially worse off.
• Management (D&O) Liability – covers the personal liability of directors, officers and senior managers for mistakes they make in running the business. This may result in a loss to the company, its shareholders, or bank or an investigation by ASIC, EPA or other government agencies.

What does Liability Insurance cover?

Cover depends on the type of Liability Insurance you’ve purchased, as well as your business and your industry:

1. Public Liability Insurance – covers people, businesses, events and contractors for legal defence costs if legal action is taken against you or the business, whether it’s a genuine claim or a try-on from a disgruntled customer. This insurance will also pay any damages awarded by a court if found responsible for causing personal injury or damage to property, as well as any resulting financial loss. While Public Liability cover can be mandatory, like plumbers in some states, it’s mostly optional and a decision for the business owner.
2. Product Liability Insurance – If you make, import, sell, distribute or repair products, you can be responsible for personal injury, property damage or resulting financial loss due to faults in the product, product advice about the use, or even customer misuse. You are unlikely to be able to depend on the original manufacturer, importer or retailer to protect you and pay for your legal costs. So, it’s a good idea to take out Product Liability Insurance as protection against potentially having to pay expensive legal defence costs and any damages awarded by a court.
3. Professional Indemnity Insurance – provides cover for professionals which is any person that has expertise and is usually part of a trade or professional group, such as builders, designers, architects, IT consultants, and allied health professionals, as well as doctors and lawyers. It covers legal defence costs and any damages awarded from an act, error or omission arising from professional services you and your business provide to customers and clients.
4. Management Liability Insurance – covers directors, officers’ and senior managers against actual or alleged acts, errors or omissions arising out of the operation or management of the company. The cover is for personal legal defence costs, as well as any damages awarded for a breach of work-related duties and responsibilities. The policy will also reimburse the company for any legal costs advanced to the director or officer.

As you can see, there’s a wide range of Liability Insurance, with cover tailored to each industry and type of business. The better advice you get, the more informed your decision to ensure the best protection for you, your directors and managers and the business.

We’ll be glad to talk with you to understand your needs and provide advice on the best way to manage your personal and business liabilities.

Frequently Asked Questions

What is an example of liability insurance? 

There are mandatory and optional liability insurance covers required by government bodies or professional organisations.

1. Mandatory or Statutory Liability Insurance policies include Professional Indemnity (also referred to as PII or E&O insurance), Motor Vehicle CTP, Workers' Compensation and Builders Warranty.
2. Optional Liability Insurance policies include Property Owners’ Liability under a home or property insurance package, Protection & Indemnity insurance for boats, Public Liability for shop or office owners, and Product Liability for importers, wholesalers and builders.

What is covered by liability insurance in Australia?  

Liability Insurance covers a person or a business against claims (whether real or invented) that the person has been injured, their property has been damaged, or they’ve suffered a financial loss. All policies provide legal costs to defend against threatened or actual litigation, and also pay for damages if you or the business are found to have been responsible.

What kind of liability insurance do I need? 

Some occupations, such as builders or tax agents, must have Liability Insurance in place before starting a business. Talk to your professional organisation or industry association about what insurance you need. Other Liability Insurances are optional – for example, a large food producer may look at buying Product Recall, whereas retailers and property owners would purchase Public Liability. Motor Vehicle CTP and Workers' Compensation are required if you own or operate vehicles or have employees.