Whether it is car, house, pet, possessions or life insurance, we all have insurance in the hope that we will never have to use it. However, this does not make insurance generally any less important to have.
Professional indemnity insurance is often a much forgotten insurance when it comes to business; however if you are a sole trader or in a partnership, you won’t be afforded the same protection as that of a limited company or limited partnership. If you are negligent or even make an innocent mistake which causes financial loss to a client/customer, then it is not just your business which will have to pay out for legal fees and compensation, but also your home if your business has insufficient assets to meet the costs. Professional indemnity insurance is absolutely crucial if you are a sole trader, or in a partnership where you are offering advice or other services whereby people rely on you for accurate information and a 100% accurate service.
In the present day and age of the ‘claim culture,’ you can almost guarantee that no matter how well you get on with your customers or clients, if you have not given them precisely what was promised, then you are highly likely to face a claim.
It is easy to go along with the day-to-day business matters and take a ‘cross that bridge when we come to it approach’, but seriously and honestly consider the following before you take this laid-back approach; how will you pay for legal costs in defending a claim made against you? How will you pay compensation for loss suffered by your client? How much money do you have set aside for dealing with potential claims? What would you do if your business has insufficient realisable assets to cover the financial costs?
If you are worried about adding another expense to your business with professional indemnity premiums, then think seriously about whether you should risk carrying on in business until you can afford to have such insurance. It is one thing risking your business, but quite another to risk your home and livelihood as well. If you are a sole trader, freelancer offering a service or in a partnership, you cannot really afford not to have professional indemnity insurance.