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What's professional indemnity insurance?

What is professional indemnity insurance?

Professional indemnity insurance is cover for businesses that offer professional advice or services. It protects your business should a mistake or negligence on your part result in financial loss to your client.

Depending on your policy, your professional indemnity insurance may cover your legal costs as well as any compensation or damages you become liable for.

Who needs professional indemnity insurance?

Professional indemnity insurance may be compulsory in certain types of industries and within certain states. Even if it’s not mandatory for your business, you may want this insurance anyway, as it can shield you from personal liability if your advice or service causes losses or damages for your customers. 

Keep in mind that your potential customers may require you to have professional indemnity insurance before they sign a contract with you.

What is covered by professional indemnity insurance?

Breach of duty

“Breach of duty” means that a business has failed to perform a fundamental function of its job. 

Example: A homeowner hires a contractor to build an enclosed porch. The contractor starts the project but doesn’t finish it. 

Breach of privacy

Example: A service provider fails to adequately secure its customer contacts, and a hacker steals customer credit card numbers.

Intellectual property infringement

Example: A business hires a graphic designer to create a new look for its website. The designer uses a photograph without obtaining permission. The owner of the photograph then sues the customer for copyright infringement. 


Example: A politician hires a strategist to create an ad campaign. The strategist creates an ad that contains false and harmful statements about the politician’s competitor. The competitor sues the politician for defamation. 

Lost/damaged documents

Example: A business hires an accountant to lodge its taxes. The accountant loses all of the customer’s tax receipts, so the business is unable to claim any deductions.

Professional indemnity insurance also covers legal fees associated with claims against your business and costs relating to reputation management, if a customer’s claim resulted in negative publicity for your business.

How much does professional indemnity insurance cost?

The cost of professional indemnity insurance varies depending on: 

Company size

If you have thousands of employees, the risk of human error is higher than it is for small businesses with a few workers, so you’ll pay higher premiums.


The more you earn, the more you stand to lose, so insurance premiums are generally greater for high-turnover businesses.


In some industries — construction, for example, mistakes can cause catastrophic consequences. That’s why insurance premiums would be higher in this industry than in, say, the hair and beauty profession.

Claims history

If a customer has previously sued your business, you’ll likely pay higher-than-average premiums.

Cover, benefits and deductible 

Cover amounts vary, and the greater your cover, the higher your premiums will be. When getting quotes for professional indemnity insurance, ask how deductibles impact your costs — higher deductibles often mean you’ll pay less for your policy.

Keep your business running smoothly with MYOB

Starting a business is hard work. There’s a lot to consider, including all important business insurance. But when you have all the foundations in place, your next step is to launch your startup and build it.

MYOB can help. Our online accounting software offers powerful solutions for your cash flow, invoicing, payroll and much more. Whatever your business goals, MYOB has you covered.

Disclaimer: Information provided in this article is of a general nature and does not consider your personal situation. It does not constitute legal, financial, or other professional advice and should not be relied upon as a statement of law, policy or advice. You should consider whether this information is appropriate to your needs and, if necessary, seek independent advice. This information is only accurate at the time of publication. Although every effort has been made to verify the accuracy of the information contained on this webpage, MYOB disclaims, to the extent permitted by law, all liability for the information contained on this webpage or any loss or damage suffered by any person directly or indirectly through relying on this information.

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