Professional Indemnity Insurance South Africa
Professional Indemnity Insurance
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What is Professional Indemnity insurance?
Who needs Professional Indemnity insurance?
Professional Indemnity Insurance is a must-have for professionals who give advice or offer services to their clients, such as consultants, engineers, architects, accountants, legal practitioners, assessors, IT experts and many more.
It safeguards them from financial losses arising from mistakes, oversights, or carelessness in carrying out their professional duties. Additionally, it is commonly a requirement for companies that operate in regulated fields, for example, healthcare, law, accounting or financial services.
Put simply, any business that:
- Sells knowledge or skills.
- Provides audit services or advisory services.
- Provides designs, reports, specifications or supervision.
is likely to need professional indemnity insurance. Read our Blog to find out how to choose the right professional indemnity insurance.
Get Professional Indemnity Insurance From R 448 p/m*
What does Professional Indemnity cover?
With professional indemnity you will be covered for a claim made against you as a result of negligence.
This includes
- Failure in design and specification.
- Negligence in project management.
- Incorrect advice given as a professional of a specific field.
- Misrepresentation and breaches of confidentiality.
- Failure to conduct proper background checks.
- Incorrect valuation of a property for a bank.
- Failure to adequately place cover by an insurance broker.
- Dishonesty under your supervision.
- Unintentional breaches in advertising codes or license.
How will Professional Indemnity insurance protect my business?
Your insurance policy will have its own specific list of insured events and exclusions. It is best to check with your insurer or the policy wording to confirm the details of your Professional Indemnity insurance policy.
Some commonly covered and not covered items include:
What is usually included?
- Providing your client with misleading advice
- Privacy and confidentiality violations
- Wrongful accusation or defamation
- Damaged or misplaced documentation
- Negligent project management
- Failure to conduct necessary background checks
- Trademark, patent or copyright infringements
- Legal defending costs
What is usually not included?
- Known claims or circumstances not disclosed before inception
- Deliberate, dishonest or criminal conduct by the insured
- Services outside the declared professional activities
- Work completed before the applicable retroactive date
- Claims arising after cover has ended where no applicable run-off cover exists
- Contractual liabilities beyond the liability that would otherwise have existed
- Fines, penalties and punitive damages where uninsurable
- Certain work or claims connected to excluded territories
- Bodily injury or property damage more appropriately covered under another liability policy
How much cover do I need?
Take the time to think about the amount of work that you perform and the appropriate amount of financial protection you would need in the event that a Professional Indemnity claim is made against you.
There are a few questions to consider when trying to calculate how much professional indemnity cover to get:
- What are your potential risks and the cost of the occurrence of these risks?
- What is the value of your project or your service?
- What are your professional statutory requirements?
- What are the requirements of any professional association that you are a member to?
Keep in mind that as your business grows so do the potential risks and adjust your cover accordingly.
What is the difference between professional indemnity and public liability?
What happens if I under-insure or over-insure for Professional Indemnity?
If you under-insure and take out too little cover, your business may be forced into bankruptcy if a claim is made against you.
It is difficult to over-insure for professional indemnity, as there is always the possibility that a big event could happen, but taking out a policy with a high premium may put a strain on your business.
Additional benefits included in Professional Indemnity cover
With Professional Indemnity cover, there is additional protection against financial or legal costs for:
- Defamation - damage to your reputation.
- Cost of Fee Recovery - costs of collecting tax and fee liabilities that are unpaid for.
- Liability Following Employee Dishonesty - any fraudulent act committed by an employee.
- Participation in Joint Ventures - a business arrangement gone wrong.
- Loss Of Documents - documents that cannot be located or destroyed.
- Criminal and Statutory Defence Costs - costs in relation to the claim.
- Defence Costs to Appear Before a Regulatory Body - costs while defending in court.
- Liability for Subcontracted Duties - failure to execute the job hired for.
- Wrongful Arrest - cover for loss of income and physical injury.
- Claims Preparation Costs - costs of complying with the provisions of the contract.
- Public Liability - claims made by the public.
See your policy schedule for limits and more information. For a deeper understanding of how Professional Indemnity Insurance can protect your business, read our blog on its key benefits.
How much does Professional Indemnity insurance cost?
Generally, the higher the level of risk that a business is exposed to, the higher the cost of the premium.
Numerous aspects play a role in influencing the premium, which include:
- Number of past claims: the more claims you have had in the past, the higher your premium.
- Occupation: certain occupations are deemed as higher risk.
- Amount of cover: the higher amount of cover you choose, the higher your premium.
- Annual revenue: Your annual revenue can impact the monthly premium.
Based on historical analysis, the average monthly premium for small business range between R448 - R870 per month
Things to consider to ensure you have the right Professional Indemnity Insurance coverage for your business
When purchasing Professional Indemnity Insurance, there are several key factors to consider to ensure that you have the right coverage for your business
- Coverage Limit: One of the most important factors to consider is the coverage limit. This is the maximum amount the insurance company will pay out in the event of a claim. Make sure that the coverage limit is adequate for your business and that you have enough protection in case of a large claim.
- Policy Exclusions: Read the policy carefully to understand what is not covered. It's important to know what's not covered so you can make an informed decision.
- Retroactive Cover: Some policies have retroactive coverage, which means that they cover claims that occurred before the policy was purchased. This can be important if your business has been around for a while and may have potential liabilities.
- Financial Stability of the Insurance Company: The financial stability of the insurance company is important because if the company becomes insolvent, it may not be able to pay out claims. Research the company and read reviews to ensure that the company you choose is financially stable.
- Premiums and Deductibles: Compare premiums and deductibles from different insurance companies to find the best deal for your business.
Mistakes businesses make when changing insurers
Changing professional indemnity insurers should involve more than comparing premiums. Because these policies are usually written on a claims-made basis, even a small gap or change in terms can affect whether a future claim is covered.
Common mistakes include:
- Losing the existing retroactive date, which may leave earlier professional work outside the new policy.
- Failing to disclose known claims or circumstances before moving cover.
- Allowing a gap between policies, even for a short period.
- Comparing premium without comparing the wording, exclusions, excesses and extensions.
- Ignoring how defence costs are treated, particularly whether they reduce the available limit of indemnity.
- Cancelling cover without considering run-off insurance when retiring, closing or selling the business.
The replacement policy should be confirmed before the existing cover is cancelled, with continuity of cover and the full scope of professional services carefully checked.
Frequently Asked Questions
Professional indemnity insurance is not universally compulsory for every South African professional. It may, however, be required by legislation, a professional body, an employer, a client contract or a tender. The applicable requirement depends on the profession and the work being performed.
Insightful Reads: Explore Our Blog Selection
A Guide to Finding the Right Professional Indemnity Insurance
Risks of Cancelling My Professional Indemnity Cover
