How to choose professional indemnity insurance

Knowing how to choose professional indemnity insurance means comparing how each policy is built as well as what it costs. Professional indemnity insurance is designed to cover claims that your advice, service or work caused a client financial loss.

This professional indemnity insurance checklist sets out 10 things to check before you buy or renew. Cover depends on the policy and insurer you choose. Check the policy wording and its terms and conditions for what is and isn't included.

How to choose professional indemnity insurance: checklist at a glance

What should you look for in professional indemnity insurance?

Step 1: Check contract, licence and professional body requirements

The highest requirement among your contracts, licence and professional bodies usually sets the minimum limit your policy may need to meet. For example, the Tax Practitioners Board requires registered tax and BAS agents to maintain professional indemnity insurance that meets its requirements during their registration.

Our guide to what level of professional indemnity cover you need sets out common limits by profession.

Step 2: Check the legal entity named on the policy

The insured named on your policy schedule should match the business that provides the services and signs the contracts. If you trade as a sole trader but the schedule names a company, or the reverse, the insurer may question whether the policy responds, as the entity does not match.

The insured should be the trustee (if you operate through a corporate trust), not the trust, as well as the Pty Ltd and the parent company or operating entity. If you have multiple entities, always try to list them all and ask your insurance broker or the upcover team to help you with this.

The business name, ABN and entity type on the schedule should match your ABN registration. Your Certificate of Currency, the document confirming a policy is in force, should show the same details.

Step 3: Check the professional services description

A professional indemnity policy is designed to respond to claims arising from the professional services described on your policy schedule. A bookkeeper who adds business advisory work may need both on the schedule. If a client makes a claim about a service your schedule leaves out, or that hasn't been notified to the insurer previously, the insurer may consider declining it if they were not aware of the activity and would not have accepted it as covered under the insurance policy.

Where an insurer agrees to add a new service, it usually does so by endorsement: listing the activity on your policy schedule and issuing a written change to your policy. This may cost an additional fee.

Step 4: Understand claims made cover

Professional indemnity is generally a claims made policy. That means a claim can occur in the period of insurance when it is brought against you. That could be a letter of demand, a writ or a civil suit.

It is not typically an 'occurrence based' policy, which is triggered by the date the services were originally provided. So it is important to keep your cover active and continuously in place (also called continuity of cover).

This then means the retroactive date on your schedule should cover you for claims brought from services for as long as you have been providing them. You can ask your insurance broker or the upcover team about how you can also get an unlimited retroactive date.

If a policy lapses, a claim may arrive with no policy in force to respond.

Public liability insurance, designed to cover claims for injury or property damage, is generally occurrence-based instead. The policy in force when the incident happened may respond. Our guide to claims made versus occurrence insurance compares the two.

When should you tell your insurer about a complaint?

If you're concerned about a particular client service or experience, you can always consider telling your insurer as soon as you become aware of an incident, complaint or circumstance that could lead to a claim. Importantly, this doesn't impact your premiums or cost of insurance until a claim arises, and it means that any future claim is triggered from the original date you notified the insurer, so it helps spread the risk of claims across policy periods too. You don't need to wait for a formal demand.

Claims made, occurrence-based and discovery claims are to be notified to the insurer as soon as reasonably practicable. Also keep in mind that notifying of a claim late may affect your claim. Known complaints need to be disclosed to a new insurer when you switch.

If you've purchased a policy through upcover, you can start a claim through upcover support or by contacting our team directly on support@upcover.com or 1300 UPCOVER (1300 872 683). Admitting liability, incurring costs or agreeing to a settlement before you notify your insurer may affect your claim. Starting a claim does not confirm that your claim is covered; your insurer assesses it under the policy terms, conditions, exclusions and limits.

Step 5: Check the retroactive date

The retroactive date is the earliest date of past services the policy may respond to. If you switch insurers, a new policy may set a later date, such as its own start date. Services before that date may then sit outside cover.

An upcover team member or an insurance broker can ask whether a new policy can match your existing date.

For registered tax and BAS agents, the Tax Practitioners Board requires a new policy to provide retroactive cover. It must reach back to the earlier of the current policy's retroactive date and the start of a continuous series of policies.

Step 6: Compare the specified limit, excess and defence costs

The specified limit is the most the insurer may pay, subject to the policy terms. It may apply per claim, in the aggregate (the most the insurer pays in total for the policy period) or both. Sub-limits may cap particular benefits.

Defence costs may sit within or outside the specified limit. Within it, spending on lawyers and investigations reduces what remains for compensation and any settlement; outside it, defence costs are generally paid in addition.

The excess is the amount you contribute to a claim, and some policies apply it to defence costs too. How defence costs and the excess apply varies between policy wordings, so always check with your insurance broker or the team at upcover.

Step 7: Read the exclusions

Exclusions commonly include, but are not limited to:

• Claims and circumstances you knew about before the policy started
• Services not listed on your policy schedule
• Services provided before the retroactive date
• Liability you take on under a contract that would not otherwise exist under the law
• Dishonest, fraudulent or criminal acts by you. Dishonesty by an employee may sit under the crime or fidelity section of a management liability policy, designed to cover losses from employee dishonesty, where you arrange one
• Refunds, or the cost of redoing, correcting or improving your own work
• Claims brought in courts in the United States or Canada
• Fines and penalties that cannot be insured at law
• Injury or property damage from an accident connected with your business, which generally sits with public liability
• Cyber incidents and data breaches, which generally sit with cyber insurance

Important: This list is not exhaustive. Exclusions vary between insurers. Always refer to the policy wording and its terms and conditions for the exclusions that apply to you, and if you have questions you should speak to your insurance broker or the upcover team.

Step 8: Check who the policy insures and how it treats subcontractors

Professional indemnity policies are commonly designed to cover the business and its people, such as employees, directors or partners. Whether a policy responds to work you pass to subcontractors varies between policy wordings, so always check with your insurance broker or the team at upcover.

Step 9: Ask about run-off cover before you stop

Run-off cover keeps the window open for claims that might be brought against your business for past work after you retire, stop operating, sell your business or exit your industry and go back to employed work. It is usually arranged for a set number of years. The period varies between insurers.

Importantly, it can typically only be arranged from your existing insurer with your current insurance policy and may be available for up to 7 years. In allied health, some associations expect members to hold run-off for a time after they stop practising. Businesses commonly discuss run-off with an upcover team member or an insurance broker before a policy is cancelled and before they exit the industry or business, rather than after.

Run-off is a claims made concept, so it isn't generally needed for an occurrence-based policy.

Step 10: Check your Certificate of Currency

Clients, tenders and professional bodies commonly ask for a Certificate of Currency as evidence of cover. Our guide to what a Certificate of Currency is explains each field. Before you send it, check the business name, ABN, services, specified limit, policy period and insurer.

How do you compare professional indemnity quotes?

Two quotes at a similar price can differ on the terms that shape a claim. Our guide to professional indemnity insurance cost explains what drives the price.

Which professions should check these points more closely?

Work that involves close client reliance, strict contracts or a registration scheme puts more weight on the steps above.

• Management consultants: advice, reports, strategy and project management work on the schedule, and any limit client contracts set.
• Accountants and bookkeepers: BAS, bookkeeping, payroll, tax and advisory services on the schedule, plus the Tax Practitioners Board requirements in steps 1 and 5.
• IT and software professionals: development, systems and service-level work on the schedule. Tech professional indemnity is designed to cover claims that tech services or advice caused a client financial loss. Data loss and cyber incidents generally sit with cyber insurance.
• Allied health practitioners: treatment, reports and telehealth on the schedule. Practitioners in AHPRA-registered professions must have professional indemnity insurance arrangements that meet their Board's registration standard.
• Engineers and designers: design, certification, drawings, specifications and site advice on the schedule. Our guide to professional indemnity insurance in NSW explains the NSW requirements. In Queensland, for example, anyone providing professional engineering services in or for the state must be registered with the Board of Professional Engineers of Queensland.

What information goes into a professional indemnity quote?

Each insurer can quote on the same basis when you have these ready:

• ABN and registered business or trading name, as shown on ABN Lookup
• Your profession and every service line you provide
• Annual turnover or fee income
• The minimum limit any contract, licence or professional body requires
• Details of current or previous cover, including the retroactive date
• Any claims or circumstances you already know about

An upcover team member or an insurance broker can talk through any insurance requirements in your contracts before you complete the proposal form or record of answers.

How upcover can help

upcover arranges professional indemnity insurance for Australian professionals and businesses. Cover can be arranged standalone or bundled with public liability. upcover works with 80+ insurance partners and can arrange quotes from a range of insurers.

• 70,000+ businesses covered across Australia
• 4.9/5 customer rating
• 80+ insurance partners

Worked through the checklist? Get a professional indemnity insurance quote through upcover. For related guides, see professional indemnity versus public liability and professional indemnity versus management liability.

Frequently asked questions

How do you choose professional indemnity insurance for your business?

Choosing professional indemnity insurance starts with the minimum limit your contracts, licence or professional body require. From there, compare the services description, specified limit, defence costs, excess, exclusions, retroactive date and run-off terms across quotes, as well as the price. An upcover team member or an insurance broker can talk through what fits your situation.

What should I compare between professional indemnity quotes?

Compare the specified limit, whether defence costs sit within or outside it, the excess and the retroactive date. Then check the services described on the schedule, any sub-limits and how run-off is arranged. Two quotes at the same price can differ on all seven.

Can I switch professional indemnity insurers without losing cover?

When switching insurers, the new policy may respond to past work back to its retroactive date. If that date matches your existing one, earlier services may stay within cover; if it is later, they may fall outside it. Claims and circumstances you knew about before the new policy started are commonly excluded.

Is professional indemnity insurance tax deductible?

The ATO lists professional indemnity insurance premiums among the general operating expenses a business may be able to claim. A registered tax agent can confirm how this applies to your business.

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_{Written by upcover's editorial team.}

_{This article provides general information only and does not take into account your objectives, financial situation or needs. Professional indemnity terms, exclusions, limits and requirements vary by occupation, insurer and policy wording. Insurance availability and cover are subject to underwriting and the terms, conditions, limits and exclusions of the relevant policy. Read the policy wording and its terms and conditions before deciding. upcover arranges insurance products with selected insurers and underwriters and does not compare all general insurers or insurance products available in the market.}