Some occupations in South Africa require a prerequisite amount of insurance coverage. Let’s dive into professional indemnity insurance, what it is & its legal requirements.
Whether you’re in construction, engineering, legal counselling, representative work, management consulting, or accounting – you deal with clients on a personal level. Your work involves advice and specialized services which will often leave you at risk of legal claims and other liabilities. Negligence, even if it’s unavoidable and faultless, can leave you with a lawsuit and a massive financial pay-out.
Dealing with these situations without an insurance policy can cause small businesses to shut their doors forever. Let’s dive into what professional indemnity insurance is, what business types will need it, if it is mandatory, and more.
First and foremost, let’s briefly cover what professional indemnity insurance is, and how this type of cover will protect your business.
PI insurance protects businesses that provide specialized services and advice. In essence, Professional Indemnity insurance is necessary for accountants, legal practitioners, consultants, consulting engineers, quantity surveyors, psychologists, and other professions exposed to specialized risks
Professional Indemnity insurance provides the necessary protection to ensure that you can operate with confidence, knowing that you have coverage in case anything goes wrong. Professional indemnity insurance is a type of insurance that protects professionals from financial losses arising from claims of professional negligence or errors. It provides cover for legal costs and compensation payments that may arise from a client’s claim against you for losses resulting from your professional services
Professional service providers are at unique risk when it comes to legal claims and alleged failure to provide, which makes this insurance type a valuable asset in the risk management of our clients and other SMEs in South Africa.
Professional liability insurance can cover you and your business in several ways:
- Negligence in project management
- Incorrect advice given as a professional of a specific field
- Failure in design and specification
- Misrepresentation and breaches of confidentiality
- Failure to conduct proper background checks
- Dishonesty under your supervision
- And more
In South Africa, in most cases, professional indemnity insurance is technically not mandatory for small business owners.
However, certain occupations require it, for example:
- Lawyers: The Attorneys Insurance Indemnity Fund (AIIF) provides attorneys with a primary layer of Professional Indemnity cover at no additional cost. This is subject to the terms outlined in the AIIF’s Master Policy. This limit of indemnity is however applicable to the entire firm and it is important to ensure that the firm has adequate PI insurance.
- Financial Services Providers: In terms of the FAIS Act 2002, Financial Services Providers require a minimum of R1,000,000, up to a minimum of R5,000,000 dependent on the relevant category provider. For more details, click here
- Accountants: Dependent on the registration body and industry, PI may be required. An example of this is Assurance engagements on the AFS of Medical Schemes as per the IRBA guidelines
- Tax Practitioners: For Certified Tax Practitioners there is a requirement that all practicing IAC members, who provide a service to the public, are required to have PI Insurance.
Moreover, in some cases, you’ll need certain types of active insurance coverage to be considered for official or government contracts. Additionally, some contracts and projects will require you to have active insurance coverage before you are able to apply for the job or contract.
You may need professional indemnity insurance if your business has the following:
- A client that requires proof of insurance
- Work in an industry that requires basic insurance cover
- Work on official government contracts
Despite the lack of requirement in other instances to have professional indemnity insurance, you are still at great risk for liability without some type of PI cover in place. The point of risk is not in the legal requirements, but in the liabilities you face when working with clients.
Depending on your occupation, your business will face unique and evolving risks. Graphic designers have to create logos and bring their client’s ideas into the world – resulting in risks that will be different from accountants or civil engineers. This is why each policy is formed with your unique needs in mind.
Occupations that greatly benefit from professional indemnity insurance include:
- Accountants and bookkeepers
- IT Professionals
- Architects, quantity surveyors or draughtsman
- Consultants, including specialised design consulting
- Construction, including Engineering consulting and design
- And more
While this type of insurance may not be mandatory, this doesn’t mean your business does not need protection against threats, risks, and liabilities.
Having PI cover in place will not only increase your circle of potential clients, but you will also have the basic requirements for government contract work and other large contract work – regardless of your business type. These specialized contracts will require you to have certain active insurance coverage before you can begin official work.
PI insurance will also give you the peace of mind to focus on the thing you do best – which is running your business. Working with clients can be fun again, without that looming threat of a potential mistake and legal claim. Professional Indemnity insurance is the safety net every business needs to thrive and progress in South Africa.
In the event you ever need to show proof of your professional indemnity insurance cover, such as when bidding on government contracts or signing a client’s contract – you can show your Certificate of Insurance. This can be downloaded (if you don’t have the copy you received when you updated or renewed your policy.)
Our online platform has been designed to make this entire process easy for policyholders, with everything you need in one place and entirely online.
If you are looking for the best PI insurance policy, you can get the best quotes instantly and completely online for your greatest convenience. We’ve helped create a streamlined process, hassle-free and convenient – from finding the best policy to submitting a claim.
Bi-me can provide you with multiple competitive quotes from some of South Africa’s leading insurers within minutes.
*This is general information only and does not take into account your financial situation, needs, or specific objectives. As with any insurance, the cover will be subject to the terms, conditions, and exclusions contained in the policy wording.