In recent times, there has been plenty in the news about the threats posed by cyber attacks and the associated data breach risks.
But what has this to do with professional indemnity insurance, and why is it relevant for small businesses?
What is Professional Indemnity Insurance?
Professional indemnity insurance protects professionals and businesses against unexpected compensation claims and any subsequent legal costs. It is therefore potentially relevant across a broad range of industries, but is frequently overlooked by many small business owners.
At a fundamental level, this type of insurance cover recognises the fact that both entrepreneurs and the people who they employ are human, and that humans sometimes make mistakes that can affect clients or employees adversely. Professional indemnity insurance provides the reassurance of a financial safety net in such instances.
Arguably, it’s most relevant for entities that provide professional advice to clients, such as solicitors or financial advisors. But, in reality, any business providing professional services and/or handling sensitive customer data could find themselves needing indemnity insurance, should a potential grievance or data breach arise.
The Benefits of Professional Indemnity Insurance
Quite aside from balancing the omni-present risk of human error that runs throughout any business, investing in professional indemnity insurance can offer an array of benefits.
It can increase confidence for employees when performing their everyday duties, for example, especially those at management level who may find themselves accountable for the damage caused by bad advice or a poorly administered service.
For SMEs with clear scope for future growth and development, professional indemnity insurance can help to smooth the pathway during their evolution.
More specifically, it can create a foundation from which firms can confidently undertake a wider range of professional services over time, such as handling clients’ intellectual property.
The Last Word - Do You Need Professional Indemnity Insurance?
If you’ve already done your homework to determine whether you need professional indemnity insurance, you’ll know that you definitely need this type of coverage if you provide actionable professional advice directly to private clients, operate a service that handles sensitive data, or create practical designs for manufacturing purposes.
Remember, any individual action or piece of advice that causes a data breach, financial loss, or reputational damage for a client may trigger a compensation claim, so it’s important to protect against such instances and prioritise long-term legal savings.
While having professional indemnity insurance isn’t a legal requirement in the UK, it also isn’t the legislature’s responsibility to safeguard your small business.
Most business owners would agree that it makes sense to safeguard against the inevitable operational risks faced on a daily basis. So, why place your venture at risk of hefty compensation claims or legal costs when professional indemnity insurance can cover you against it?
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