Professional indemnity insurance covers you for any claims made by a client for financial losses they’ve experienced as a result of using your services.

We recommend that all businesses, contractors, self-employed workers and freelancers get professional indemnity insurance. For more, read our full guide to what professional indemnity insurance is, what it covers, and why you need it.

But if you’re reading this, then it’s likely that you already know that you need professional indemnity insurance. The question is, how much do you need?This question largely comes down to your liability limit.

What is the Limit of Liability in Insurance?

In insurance, the limit of liability is the maximum amount your insurer will pay out in the event of a claim. You can specify your liability limit when taking out a claim. If you get professional indemnity insurance with Tapoly, for example, you can set a liability limit of up to £2 million.

A part of you might want to get the maximum liability limit, just in case. After all, you never know what’s going to happen. It’s better to be safe than sorry.

But the higher you set your liability limit, the more you’ll pay for your cover. And there’s no point paying extra for a high liability limit that you’ll probably never need.

How Much Professional Indemnity Insurance Do I Need?

You’ll need to have enough professional indemnity insurance to cover you for the level of claims you’re likely to face. But there are a number of other factors than may influence how much this might be.

Some clients will refuse to work with you unless you have a professional indemnity insurance policy in place. It’s a safety net for them as well as you, as it ensures that they’ll be covered should things not quite work out the way you plan.

These clients might even specify just how much of a liability limit they expect you to have. They may even ask to see a copy of your insurance certificate before they agree to work with you.

But not all clients will make it this easy. Most sole traders, contractors, freelance workers and small businesses will have to decide on their own liability limits. So here are some tips to help you decide what sort of limit to set for your business:

• What sort of work do you do? If you provide IT and admin support for accountants, you’ll deal with a lot less risk than you would if you, say, provided expert financial advice for large multinationals.
• What’s your annual turnover? And what sort of projects do you work on? Thinking about the scale of your work might help you think about the scale of the risk. What’s at stake? What sort of losses might your clients face if things don’t work out, and what sort of compensation might they seek?
• Are there any legal precedents? This sort of information is out there, if you look for it. But with a bit of research you might be able to find out the sort of claims that people doing similar work to you have faced in the past. For example, we recently investigated some common medical malpractice claims, to help people understand what level of medical malpractice cover they might need.

Need Some Advice?

If you need some support in deciding how much professional indemnity insurance you need, we’re here to help.

If you have any questions, or you’d like to discuss your options, you can contact the Tapoly team at info@tapoly.com, call our info line on +44(0)207 846 0180, or use the chat box on our website.