Consultant professional indemnity insurance

A straightforward guide for UK consultants

Professional indemnity insurance protects consultants when clients say a service or advice caused them financial loss. It helps cover legal defence, settlements or damages, and the cost of putting things right. In the UK, over 500 occupations buy this cover, from traditional professions like solicitors and accountants to tech, design, and scientific roles. The market is large and well established, with around 1.5 million policyholders and an estimated value of £3.3 billion. This breadth means genuinely tailored options exist for most consulting disciplines.

Claims are common. Professional indemnity is one of the most frequently claimed business covers in Britain, which is why many clients require it in contracts. Yet some firms paused cover during tougher trading conditions, creating potential gaps. In 2024 and into 2025, the market has softened, with increased insurer capacity and rate reductions in London and across the UK. That makes it a sensible moment to review limits, exclusions, and terms rather than simply defaulting to last year’s policy.

We keep this practical and impartial. You will find what PI can and cannot cover, typical costs and the drivers that affect price, and how to navigate applications and claims. We also highlight changes that matter in 2025, including extended liability risks flagged by recent legal developments. The aim is simple - help you choose cover that fits your risk profile, contractual duties, and budget, without paying for features you do not need.

Insurance can offer real financial protection, but only when you understand what is covered - and where the gaps are.

What is covered - and what is not

PI typically covers claims alleging a professional error, omission, negligent advice, breach of professional duty, defamation, or unintentional intellectual property infringement. If a client claims your advice led to lost revenue, expensive delays, or rework, the policy can fund legal defence and - if you are liable - damages or a settlement. It may also cover associated costs like expert reports and court fees. For example, a data migration consultant whose plan leads to downtime could face a claim for remedial costs and loss of profit. A design consultant who misses a regulatory requirement might need to pay for redesign and delay losses.

Exclusions are equally important. PI is not a guarantee of outcomes. It usually excludes deliberate acts, known claims or circumstances before inception, fines and penalties, product defects, bodily injury or property damage unless arising from professional services, and most cyber incidents unless explicitly endorsed. Contractual liabilities that go beyond your legal duty can be problematic. If you agree to broad indemnities or uncapped liabilities, your policy might not respond. There are also claim notification rules - you must tell the insurer promptly once you are aware of a circumstance that could lead to a claim. Late notice can jeopardise cover.

Policies are written on a claims-made basis, meaning the policy in force when the claim is made responds, not the one in place when the work was done. That is why run-off cover matters when you stop trading. Recent legal clarity around long-tail liabilities for some consulting services means reviewing retroactive dates and run-off periods is prudent.

Who benefits most from PI cover

Consultants who provide advice, design, analysis, or professional services to paying clients are prime candidates. This includes management consultants, IT specialists, engineers, marketing strategists, HR and payroll advisors, finance and tax consultants, and experts working in life sciences or data. Regulated professionals often have contractual or regulatory obligations to hold PI, and many procurement teams now require it for framework access.

If your work could reasonably cause a client financial loss if it goes wrong, you will likely benefit. Conversely, if you sell a product with no advisory element, or perform manual services where public liability is the primary exposure, PI may be less critical. Sole traders just starting out might choose a modest limit while they build a track record, then scale as contracts grow. If you have paused trading, run-off cover can protect against late-arising claims.

Choosing limits and features without the guesswork

1. Basic - essentials for micro consultancies

   • Typical limits: £100k to £500k aggregate
   • Core cover for negligence, errors or omissions, unintentional IP and defamation
   • Suits low-fee projects with limited reliance on your advice and light contractual terms

2. Standard - balanced protection for SMEs

   • Typical limits: £1m to £2m any one claim
   • Broader wording with defence costs outside the limit, mitigation costs, and fidelity sub-limits
   • Good for tenders requiring specific limits and for multi-party projects with higher dependency

3. Comprehensive - higher limits plus fewer exclusions

   • Typical limits: £3m to £10m+ layered
   • Wider cyber carve-backs, collateral warranties, and project-specific endorsements where available
   • Suitable for high-value contracts, regulated sectors, or international work with stringent terms

4. Optional add-ons and endorsements

   • Cyber liability extensions - limited first and third party cover where available
   • Contract review and risk advisory services linked to underwriting
   • Collateral warranty and novation endorsements for construction and engineering
   • Run-off cover options from 1 to 6 years, sometimes longer on request
   • Costs-exclusive defence provisions to protect limits on complex disputes

Tip: set your limit with reference to your largest contract value, potential consequential losses, and any client-mandated requirements.

What it costs - and why prices vary

Typical PI pricing depends on turnover, profession, limits, claims history, and risk controls. The UK market is in a soft phase, with increased insurer appetite and competitive rates, especially for firms with clean records and robust governance. London saw meaningful reductions recently, and capacity is broader UK-wide. Use the table to understand the main drivers.

Prices are indicative only and vary by insurer. Always compare wordings alongside premiums.

Can you apply - and what insurers check

Most UK-based consultants, including sole traders, partnerships, and limited companies, can obtain PI. Insurers will ask about your services, turnover, largest contracts, jurisdictions, and whether you use subcontractors. Expect to provide proposal forms, claim histories, risk control summaries, and sample contracts or statements of work. If you work with regulated activities or high-risk sectors, additional details may be required.

Common decline reasons include prior insolvency, undisclosed claims, poor contract terms with unlimited liability, unlicensed regulated activity, or high-risk work without adequate controls. If you have had a claim, clarity helps - outline root causes and the improvements you have implemented. For firms closing or retiring, run-off is usually available, subject to prior claims and the retroactive date.

From quote to claim - the simple route

1. Gather turnover, services, and contract details for the last 12 months.
2. Complete a proposal form with accurate disclosures and risk controls.
3. Compare limits, exclusions, deductibles, and defence cost provisions.
4. Select cover and request endorsements that match your contracts.
5. Bind the policy and diarise notification and renewal dates.
6. At the first sign of an issue, notify the insurer or broker promptly.
7. Cooperate in the investigation, sharing documents and expert reports.
8. Review outcomes and update risk management to prevent recurrence.

The upsides and the trade-offs

Key checks before you commit

Confirm the retroactive date aligns with the start of your trading or earlier relevant work. Understand the deductible and whether defence costs are inside or outside the limit. Review exclusions for contractual liability, cyber incidents, and jurisdictional limits. Check any client-mandated provisions, such as minimum limits or specific endorsements. Pay attention to notification conditions and time limits. At renewal, compare changes in terms and pricing - soft markets can present opportunities to improve cover. Keep documentation like contracts, scopes, and QA records accessible to support both underwriting and any future claim.

Alternatives and complementary covers

1. Public liability - for third party injury or property damage not arising from advice.
2. Cyber insurance - for data breaches, ransomware, and network interruption beyond PI extensions.
3. Directors and officers - for alleged wrongful acts in company management.
4. Business contents and equipment - for laptops, tools, and office assets.
5. Employers’ liability - mandatory if you employ staff in the UK.

Choose alternatives based on your main risks. Many consultants carry a blended programme.

Frequently asked questions

Q: Is PI insurance legally required for consultants in the UK? A: It is not generally a legal requirement, but many regulators and clients mandate it in contracts. Without it, you may be unable to bid for work or meet professional obligations.

Q: How much cover should I buy? A: Consider the largest contract value, potential consequential losses, and any client requirements. Many SMEs hold £1m to £2m, but higher limits may be appropriate for complex or regulated projects.

Q: Are rates really falling in 2025? A: Yes, the UK market remains soft, with increased capacity and competition. Many buyers, especially those with clean claims histories and strong controls, are seeing improved pricing and broader terms.

Q: What is a retroactive date and why does it matter? A: It is the date from which your past work is covered. If the retroactive date is too recent, earlier projects may be excluded. Align it with when relevant services began.

Q: Will PI cover cyber incidents? A: Only to a limited extent if specifically endorsed. Most PI policies exclude broader cyber risks. Consider a separate cyber policy for comprehensive first and third party cover.

Q: What happens if I stop trading? A: Arrange run-off cover so claims made after closure remain covered. Choose a period that reflects your project risk and any contractual obligations for maintaining insurance.

What to do next

Take stock of your current contracts, the risks you carry, and any client-mandated requirements. Gather your documents, then compare at least three policy wordings alongside price. Use the soft market to secure appropriate limits, tighter exclusions, and useful endorsements. Move at your pace - the aim is balanced protection, not overspending.

Important information

This guide provides general information only and is not personal financial advice. Insurance terms vary by insurer and policy wording. Always read your documents carefully and seek professional guidance if you are unsure about suitability or cover limits.