Even when your business follows all codes, regulations and best practices, mistakes and errors can occur.
When a failure, omission or error causes financial loss for an external party, they may seek damages. Under the Trade Practices Act (1974), you and your business may be found liable for this mistake, even if the act was not intentional or negligent.
In this case, it is important for your business to be protected by a professional indemnity policy.
What is professional indemnity insurance?
Professional indemnity insurance compensates policyholders when they are found responsible for any negligent acts, errors or omissions in the conduct of their business or profession.
This covers any costs incurred through the investigation, defence or settlement of an indemnity claim.
Any financial loss that has resulted from a mistake or failure by a professional or business may result in the affected third party being awarded compensation. This payment would also be covered by a professional indemnity policy.
Why does my business need professional indemnity?
A professional indemnity policy can protect the personal and financial assets of a professional against any legal damages awarded against them.
Professionals without professional indemnity cover would have to pay these expenses out of pocket, which can significantly affect a business’s financial standing.
Any worker who provides another person with advice or services is recognised as a professional and should consider indemnity cover.
While most employees will be protected under their employer’s policy, consultants and contractors are encouraged to review their professional indemnity needs.
However, each policy can be subject to different rules, regulations and exclusions. It is therefore important for professionals to carefully review and compare the cover they choose.