Professional indemnity insurance, often shortened to PI insurance or professional indemnity cover, is designed to protect your business against the cost of claims that you have been professionally negligent. If a client alleges that your advice, design, specification or service caused them a financial loss, the policy can cover your legal defence costs and any compensation or damages you are found liable to pay.

Professional indemnity insurance (also called PI insurance or professional indemnity cover) is a policy that covers the legal costs and compensation a business may have to pay when its professional advice, services or designs cause a client a financial loss.

It is distinct from public liability insurance, which generally responds to injury or physical damage, and from employers' liability, which protects your staff. Professional indemnity is concerned with financial loss caused by the work itself: a mistake in a report, a missed deadline that costs a client a deal, a design that fails to meet specification, or advice that turns out to be wrong.

One feature defines almost everything else about how the cover behaves: PI is typically written on a claims-made basis rather than an occurrence basis. The policy that responds is generally the one in force when the claim is made against you, rather than the one in force when you did the work. That single principle drives the retroactive date, run-off, the discovery period and the change-in-control provisions we explain below.

At its core, a PI policy provides civil liability cover for claims arising from your professional services. The exact wording varies by insurer and profession, but a well-arranged policy typically responds to:

• Negligence – negligent acts, errors or omissions in the professional services you provide.
• Breach of duty – breach of professional duty or duty of care owed to a client.
• Defence costs – the legal costs and expenses of defending a covered claim, including investigation.

Beyond the core insuring clause, most modern wordings include a range of standard extensions. The breadth of these extensions is one of the clearest differences between a cheap policy and a properly structured one:

• Loss of documents: the cost of restoring or replacing client documents and data lost or damaged in your care.
• Dishonesty of employees: claims arising from the fraud or dishonesty of your own staff.
• Defamation: unintentional libel and slander committed in the course of your work.
• Intellectual property: unintentional infringement of copyright or other IP rights.
• Breach of confidentiality, including misuse of client information.
• Mitigation and rectification costs incurred to prevent or reduce a claim.
• Court attendance and regulatory costs: compensation for time spent attending court, and the cost of responding to certain regulatory or ombudsman investigations.
• Sub-contractors and consultants: your liability for work delegated to others, subject to the wording.

Understanding the exclusions is as important as understanding the cover. A PI policy will generally not respond to:

• Bodily injury and property damage: these are generally covered under public liability insurance.
• Known circumstances: any matter you were aware of, or ought reasonably to have been aware of, before the policy began. This is why prior cover and the retroactive date matter so much.
• Deliberate, fraudulent or criminal acts by the insured (though innocent partners are often protected).
• Fines and penalties: civil and criminal penalties are generally uninsurable.
• Trading and business losses: your own bad debts or loss of profit, as distinct from a third-party claim.
• Liabilities assumed under contract that go beyond your common-law duty of care, unless specifically agreed.

If your business gives advice, provides a professional skill or service, handles client data, or produces designs and specifications, you carry professional indemnity exposure. For many it is also a formal requirement:

• Regulatory requirement – solicitors (SRA), accountants (ICAEW/ACCA), architects (ARB/RIBA), surveyors (RICS), financial advisers and brokers (FCA) and most healthcare professionals are generally required to hold PI cover to practise.
• Contractual requirement – commercial clients, public-sector frameworks and main contractors routinely require a minimum limit of indemnity, often £1m, £2m, £5m or £10m, written for the duration of the engagement and a period afterwards.
• Commercial prudence – even where it is not mandatory, a single negligence claim can exceed the net worth of a small consultancy. PI converts an existential risk into a manageable premium.

For tech and SaaS businesses there is an additional layer: AI and algorithmic exposures. See our specialist guide to professional indemnity insurance for software companies and AI developers.

For profession-specific detail, see our companion guides to professional indemnity for IT consultants and technology companies, professional indemnity for software developers and how professional indemnity and public liability insurance work together.

For how professional indemnity fits into a complete programme for consultants, agencies and advisory firms, see our professional services insurance specialism.

There is no single "professional indemnity insurance" product. The market is organised around profession-specific wordings, because the duties owed, and the way claims arise, differ enormously between, say, an accountant and a structural engineer. Broadly, UK PI falls into the following families.

Regulated profession wordings

These follow minimum terms set by a regulator or professional body, and are usually the hardest and most specialist part of the market:

• Solicitors and legal: governed by the SRA Minimum Terms and Conditions; often among the most onerous wordings in the market.
• Accountants and bookkeepers: ICAEW, ACCA and AAT requirements; exposure driven by audit, tax and advisory work.
• Surveyors and valuers: RICS-compliant wordings for building, quantity and valuation surveyors, with valuation work rated heavily.
• Architects and architectural technologists: ARB/RIBA expectations, with long liability tails on completed buildings.
• Financial advisers, IFAs, mortgage and insurance brokers: FCA-driven cover with prescribed minimum limits.
• Healthcare and allied health: medical, dental and paramedical indemnity, often via specialist schemes.

Construction and design wordings

• Engineering: civil, structural, mechanical, electrical and building-services engineers, where a defect can surface many years after completion.
• Design and construct (design and build): for contractors who take on design responsibility as well as construction; the wording must dovetail with collateral warranties and the building contract.
• Single project / project-specific PI: arranged for one development and maintained for the full liability period, useful where parties want certainty independent of any one firm's annual policy.

Technology and media wordings

• Technology PI: for IT consultants, software developers, SaaS providers and telecoms, usually blended with cyber cover because the exposures overlap. See our technology insurance specialism and our cyber insurance for AI companies guide.
• Media, marketing and creative: advertising, PR, design and digital agencies, with emphasis on IP infringement and defamation.

Miscellaneous and other commercial wordings

The "miscellaneous" category is a genuine market class, not a catch-all afterthought. Miscellaneous PI (often called "misc PI" or general commercial PI) is the residual wording insurers use for the broad universe of advisory and service businesses that do not sit within a named profession scheme. It is the workhorse of the market and where most SME consultancies are placed. Common occupations written as miscellaneous or near-standalone classes include:

• Management, business and strategy consultants
• Recruitment consultants and employment agencies
• Project managers, programme managers and expert witnesses
• Health & safety, environmental, energy and sustainability consultants
• Training providers, coaches and tutors
• Estate agents, letting agents and property managers
• Marketing, social media and PR freelancers
• Designers, photographers and other creative professionals
• Data, analytics and other niche advisory businesses

Because the same job title can be written under different wordings depending on the insurer and the work undertaken, the right classification is a broking decision, not an administrative one. Placing a business in the wrong class can create gaps that only surface at claim stage.

Professional indemnity is typically written on a claims-made basis. This means the policy that responds to a claim is generally the one in force on the date the claim is made against you (or the date you become aware of circumstances that could give rise to a claim), regardless of when the work was actually carried out.

The practical consequences are significant. You should generally maintain cover continuously for as long as you could still be sued for past work, often at least six years. You must notify circumstances promptly, because a late notification can fall into the wrong policy year, or no policy year at all. And the date features described below — the retroactive date, discovery period and run-off — all exist to manage the gap between when work is done and when a claim might emerge.

The retroactive date is one of the most important dates on a professional indemnity policy. It is the earliest date from which your past professional services are covered. Any claim arising from work carried out before the retroactive date is generally excluded, even if the claim itself is made during the current policy period.

When you first take out cover, the retroactive date is usually the policy inception date. As long as you maintain continuous cover, that original retroactive date should generally be carried forward each year, giving you "full retroactive cover" stretching back to when you started insuring the business. Problems arise when:

• You switch insurer and the new policy resets the retroactive date to the new inception, stranding years of past work.
• You allow a gap in cover, which can break the chain.
• An insurer imposes a later retroactive date as a condition, often after a claim or a change in the business.

Watch the retroactive date when you switch. Always check that a new or replacement policy preserves your existing retroactive date. A lower premium that quietly resets it can leave years of completed work uninsured.

The limit of indemnity is the most you can recover, but how that limit applies is just as important as its size. There are two principal bases of settlement.

A related question is whether defence costs are in addition to, or inclusive of, the limit. With "costs in addition", legal defence costs are paid on top of your limit of indemnity; with "costs inclusive", they erode it. For exposures where defence costs can be substantial, costs-in-addition wording can be materially more valuable. Many regulated wordings, such as some solicitors' wordings, tend to be written on an each-and-every-claim basis with costs in addition, whereas standard SME policies are frequently aggregate with costs inclusive.

Because professional indemnity is claims-made, your live policy generally stops responding once it lapses, yet your liability for past work can continue for years. The period during which those late claims can still emerge is known as the tail, and run-off cover is the insurance that protects you during it.

You need run-off cover when the business:

• Ceases trading or is wound up
• Is sold or merges into another entity (see change in control, below)
• Stops offering a particular professional service
• Has a sole practitioner who retires

Run-off is typically maintained for at least six years, reflecting the standard limitation period for contractual claims in England and Wales, and is often held longer where the work carries a long latency — construction and design being the obvious examples, where defects can surface well beyond six years. Pricing usually steps down over time as the tail shortens. For many regulated professions, arranging run-off is a mandatory part of closing a practice. For deal-driven run-off, see our mergers and acquisitions specialism.

Two distinct geographical clauses govern where you are covered, and they are frequently confused:

• Territorial limit: where the work is carried out or the event giving rise to the claim occurs.
• Jurisdiction limit: where a claim against you can be brought and litigated.

A policy might cover work performed worldwide but exclude claims brought in the United States and Canada. This distinction matters enormously: US and Canadian jurisdiction tends to carry far higher litigation and award costs, so exposure there is often either excluded, sub-limited or specifically rated. If you have overseas clients, deliver work abroad, or sign contracts subject to foreign law, the territorial and jurisdiction wording must be matched to your actual footprint — a UK-only jurisdiction limit can quietly void cover for an overseas dispute.

Many professional indemnity policies contain a change in control clause. If a controlling interest in the insured business is sold or transferred — through an acquisition, merger or change of ownership — cover is often automatically restricted to claims arising from work performed before the change took effect, and the insurer may have the right to amend or cancel terms.

This has real consequences in a transaction. The acquired entity's prior acts may need to be picked up by run-off cover, while the buyer's own policy is arranged to cover future work. Getting this wrong can leave a gap precisely when both parties assume they are protected. Because the issue sits at the intersection of PI and deal structuring, it is best handled alongside the transaction itself — our M&A team routinely coordinates run-off and continuity of cover on a sale. For background, see our M&A insurance due diligence guide.

The excess (or deductible) is the amount you pay towards each claim before the insurer contributes. On professional indemnity it usually applies on an each-and-every-claim basis. Two points are worth checking:

• Costs-inclusive vs costs-exclusive excess: whether the excess applies to damages only, or to defence costs as well.
• Voluntary higher excess: accepting a larger excess can reduce the premium, but only makes sense if the business can comfortably absorb that first layer on every claim.

Professional indemnity is rarely bought in isolation. Depending on your business, the following are commonly added, either as extensions to the PI wording or as separate sections of a wider policy:

• Cyber and data: first- and third-party cyber cover, increasingly important and often paired with technology PI. See our cyber insurance guide.
• Public liability: third-party injury and property damage, especially where you visit client sites. See public liability for office businesses.
• Employers' liability: generally a legal requirement once you employ staff.
• Directors' and officers' (D&O): personal liability of directors and senior managers — see D&O for startup founders.
• Office contents and business interruption: your premises, equipment and income.
• Crime and fidelity: theft and dishonesty beyond the standard PI extension.
• Legal expenses: contract disputes, debt recovery and employment matters.

Many businesses arrange professional indemnity as part of a combined or package policy — sometimes marketed as "professional indemnity combined" or an office/professions package — that bundles PI with public and employers' liability, office contents, cyber and business interruption under one policy and one renewal date. For an SME consultancy this can simplify administration and may improve terms, while larger or higher-risk firms often keep PI standalone so the wording, limit and insurer can be optimised independently. Which approach is right depends on the size and risk profile of the business, and is one of the first things a broker will assess. See our office insurance specialism for how these covers fit together.

Premiums vary widely, so it is more useful to understand the factors that drive price than to quote a single figure. Insurers rate professional indemnity primarily on the likelihood and potential size of a claim.

For a broker-led benchmarking exercise across rated UK insurers and Lloyd's markets, request a professional indemnity quote.

The right professional indemnity policy is not simply the cheapest one offering the limit your contract demands. It is the one whose wording, basis of settlement, retroactive date and extensions genuinely match the work you do and the contracts you sign. A policy that looks identical on a price comparison can behave very differently at claim stage.

At Taurus Risk we are an FCA-regulated, independent broker. We assess your exposures, place your risk with financially secure, highly rated UK insurers and Lloyd's markets, and explain the less obvious clauses — retroactive dates, aggregation, jurisdiction and change-in-control — before they ever matter. When you need to claim, we are here to support you through the process. Speak to a Taurus broker or read how to choose a commercial insurance broker.

A PI policy is only as strong as its wording when a claim is made. Whether you are a regulated profession, a technology business or a misc-PI consultancy, the right cover combines the correct wording, a preserved retroactive date, an "any one claim" limit where possible, and extensions matched to the contracts you sign. Taurus Risk benchmarks the entire UK and Lloyd's PI market on your behalf.