What Is Professional Indemnity Insurance in the UK?

What professional indemnity insurance actually is

Professional indemnity insurance, often shortened to PI insurance or PII, is cover that protects a business against the financial consequences of a mistake in the professional work it provides. If a client alleges that your advice, design, calculation, or service was negligent and that they lost money as a result, a PI policy meets the legal costs of defending the claim and, where the claim succeeds, the compensation or damages you are required to pay.

The key word is advice or service. Public liability insurance covers physical injury to a third party or damage to their property. Professional indemnity covers something less visible: the economic harm that flows from getting professional work wrong. A surveyor who undervalues a building, an accountant who files a return incorrectly, or an IT consultant whose system specification fails can all cause a client a substantial loss without anyone being physically hurt. PI insurance exists to respond to exactly that scenario.

Because professional services are increasingly intangible, PI cover has become one of the most widely held business insurances in the United Kingdom, particularly for sole traders, limited companies, and partnerships whose product is essentially their expertise.

What professional indemnity insurance covers

A typical UK PI policy responds to allegations arising from the professional services described in the policy schedule. The wording varies between insurers, but the common heads of cover are consistent.

• Professional negligence: a failure to apply the reasonable skill and care expected of a competent professional in your field, leading to a client loss.
• Errors and omissions: mistakes in the work itself, or something important left out, such as a missed clause, an overlooked calculation, or incorrect figures.
• Breach of professional duty: falling short of a duty owed to the client, whether contractual or arising in common law.
• Loss of documents or data: the cost of reconstituting client records or data you were responsible for and that were lost or damaged.
• Defamation, libel and slander: many policies include cover for unintentional defamatory statements made in the course of your work.
• Breach of confidentiality and intellectual property infringement: commonly included, subject to the policy terms.

Crucially, PI cover usually pays defence costs even where the claim against you is unfounded. The cost of instructing solicitors and experts to defend a baseless allegation can be significant, and that legal expenditure is often the main reason smaller firms value the cover.

PI insurance does not cover deliberate or dishonest acts, known circumstances that existed before the policy started, bodily injury or property damage (which belong to public liability), or employee injury (which belongs to employers liability). Read the policy schedule carefully, because the description of your professional activities defines the limit of what the insurer will respond to.

Who needs professional indemnity insurance

Any business that gives advice, provides a professional service, or handles client data or intellectual property should consider PI cover. For some professions it is a regulatory requirement rather than a choice.

Common buyers include management and IT consultants, architects and surveyors, solicitors and barristers, accountants and bookkeepers, financial advisers, engineers, designers, marketing and PR agencies, recruitment firms, and healthcare or therapy practitioners. Many client contracts and public sector tenders also require evidence of a minimum level of PI cover before they will engage you, so the cover is frequently driven by commercial demand as well as regulation.

For regulated professions, the relevant body sets the rules. Solicitors must comply with the Solicitors Regulation Authority (SRA) minimum terms and conditions. Chartered accountants are subject to the requirements of bodies such as the ICAEW or ACCA. Architects registered with the Architects Registration Board (ARB) must hold adequate cover under the Architects Code. Financial advisers fall under Financial Conduct Authority (FCA) rules. If you belong to a professional body, check its current minimum requirement before relying on a generic policy limit.

Typical cover levels by profession

The amount of cover, known as the limit of indemnity, is the maximum the insurer will pay. Choosing the right limit depends on the size of contracts you take on, the potential loss a client could suffer, and any minimum set by your regulator or your client contracts. The table below shows commonly required or typical minimum levels as of 2026. Always confirm the current figure with your own regulator, because these requirements are reviewed periodically.

The figures above are minimums or common practice, not a recommendation of the right limit for your business. A consultant on a 2 million pound project may need cover well above a contractual minimum, because a single error could expose the whole project value. Many firms also choose an aggregate limit that covers multiple claims in a year rather than a single claim, so check whether your quote is per claim or in the aggregate.

Claims-made versus occurrence basis

One of the most important and least understood features of PI insurance is how it is triggered. Almost all UK PI policies are written on a claims-made basis, which works very differently from the occurrence basis used by some other insurances.

On a claims-made policy, the cover that responds is the policy in force on the date the claim is first made against you and notified to the insurer, regardless of when the work was carried out. So if you advised a client in 2023 but they only bring a claim in 2026, it is your 2026 policy that responds, provided you have held continuous cover.

On an occurrence policy, by contrast, the policy that responds is the one in force when the event or error actually happened, even if the claim arrives years later. Occurrence cover is common in public liability but rare in professional indemnity.

The practical consequence is that you must keep PI cover live for as long as claims could still arise from past work, even after you stop doing that work. A gap in cover can leave you exposed for historic advice. This is also why the retroactive date in your policy matters: it sets the earliest date of work the policy will cover. If you switch insurers, make sure your retroactive date is maintained so older work remains protected.

Run-off cover and why it matters

Because PI is claims-made, a problem appears the moment you stop trading: a former client could still bring a claim about work you did years earlier, but you no longer have a live policy. Run-off cover solves this. It is a continuation of PI cover, usually arranged when a business closes, merges, or an individual retires, that keeps protection in place for claims arising from past work for a set number of years.

For solicitors, the SRA requires a minimum of six years of run-off cover when a firm closes without a successor practice. Other professionals should match run-off to the limitation period for negligence claims, which under the Limitation Act 1980 is generally six years from the date the cause of action accrued, and potentially longer where the loss is discovered later. Buying run-off is not optional housekeeping: without it, a retired professional could face a personal claim with no insurer behind them.

Checking your insurer on the FCA register

Anyone selling insurance in the UK must be authorised by the Financial Conduct Authority or act as an appointed representative of an authorised firm. Before you buy a PI policy, search the insurer or broker on the Financial Services Register at register.fca.org.uk. The register confirms the firm is authorised, shows the permissions it holds, and lists any trading names. If a firm offering you cover does not appear, or its permissions do not cover insurance mediation, treat that as a warning sign and seek cover elsewhere. Checking the register is a quick, free step that protects you from unauthorised intermediaries.

Frequently Asked Questions

What does professional indemnity insurance cover?

It covers the legal costs and compensation arising from claims that your professional advice or service was negligent or caused a client a financial loss. Typical heads include negligence, errors and omissions, breach of professional duty, loss of documents or data, and unintentional defamation. It does not cover deliberate dishonesty, bodily injury, or property damage.

Who needs PI insurance?

Any business that gives advice or provides a professional service should consider it, including consultants, architects, solicitors, accountants, IT professionals, designers, and therapists. For regulated professions such as solicitors and architects it is compulsory, and many client contracts and public sector tenders require it before they will engage you.

What is claims-made PI insurance?

Claims-made means the policy that responds is the one in force when the claim is first made and reported to the insurer, not when the work was done. Almost all UK PI policies work this way. It is why you must keep cover live continuously, including run-off cover after you stop trading, to stay protected against claims about historic work.

What is run-off cover?

Run-off cover continues your PI protection after your business closes, merges, or you retire, covering claims that arise from work done before you stopped. Because PI is claims-made, a former client can still sue you years later. Solicitors must hold at least six years of run-off when a firm closes, and other professionals often match this to the limitation period for negligence claims.

Is PI insurance a legal requirement?

There is no single law requiring every business to hold PI insurance, unlike employers liability cover. However, several regulators make it mandatory for their members, including the SRA for solicitors, the ARB for architects, and the FCA for financial advisers. Even where it is not compulsory, client contracts frequently require it as a condition of doing business.