Insurances can be a bit of a minefield, especially in business. There are so many different types of insurance, both industry specific and more general, that you could end up with far more – or worse, less – than you actually need. However, being properly covered could save you thousands of pounds should you need to make a claim, and for smaller businesses this could mean the difference between staying in business and shutting down.
One of the most misunderstood, and potentially confusing insurances is indemnity insurance, but it is an important policy to have if your business matches the criteria. Here is a bit of information on indemnity insurance to help you decide if you need it:
One of the main groups of businesses that would benefit from indemnity insurance are those that offer advice. Within this field there is much that could possibly go wrong, as advice is not an exact science. Within this area are companies like business advisors, financial advisors and law professionals. If a client complains that the advice they were given was incorrect or has caused them damage, then they have grounds to make a claim against you. If you have professional indemnity insurance then all the legal fees and any compensation due is paid for through your policy rather than by your company. Many clients will not work with advisors unless they have this insurance in place as a safeguard for any work you do for them.
Another group that could potentially save money on expensive claims using this insurance are those that handle sensitive data relating to their clients, including financial or personal information. Businesses that fall under this category include PR companies, accountants, and government agencies. If the information you hold on your clients was to be stolen or leaked, for example by hacking or loss of files, the client could sue you for negligence, especially if the release of this information harmed their reputation or hurt them financially. There have been many high profile cases like this, such as when government files were accidently left on a train, and they can be very costly indeed without appropriate cover.
There are many other businesses that might require professional indemnity insurance, even if they feel confident in the service they are offering. Any business could potentially be brought to account if they are offering a service or product that could adversely affect the client if something goes wrong. The first question you need to ask is whether your business would be safer with this insurance in place. If the answer is yes then you need to ask yourself “what kind of indemnity insurance should I get???, and then do some research and speak to a financial advisor about implementing this.
There is such a thing as too much insurance, but only if you are paying for cover that isn’t applicable to you, or is way over your level of requirement. Whilst the initial outlay of insurance premiums can seem like a big expense, should you need to make a claim against a policy, the money saved will far outweigh the outlay.
This article was written by Roxanne Wells on behalf of Hiscox.