Professional indemnity insurance

A plain-English overview for UK professionals

Professional indemnity insurance protects you if a client alleges that your professional advice or services caused them financial loss. It can pay for legal defence, settlements or damages, and associated costs. For many regulated professions, it is mandatory. For others, it is a practical way to safeguard cash flow and reputation when things go wrong.

In the UK, PI is especially relevant. Professional indemnity claims have been the most frequent business insurance claims in recent years, accounting for around 26% of payouts. At the same time, some firms reduced or cancelled cover during tighter economic conditions, with a notable proportion stepping away in 2023. The result is a gap between real-world claim frequency and the number of businesses actively protected.

The market itself is significant, with annual premiums exceeding £3 billion and around 1.5 million policyholders. Conditions are currently favourable for many buyers. Rates in London decreased by roughly 5-10% in 2024 and the wider UK market softened further in 2025, with reductions up to 25% for well-managed risks. Increased insurer capacity and fewer exclusions mean more choice and broader cover, although higher risk sectors may see smaller savings.

Claims are common, but good risk management and suitable cover can make outcomes manageable rather than business-threatening.

Our aim is to explain, in clear terms, how PI works, what it covers, how to judge suitability, and how to buy confidently without overspending.

Insurance can offer real financial protection when you understand what is covered - and what is not.

What it covers and how it responds

A PI policy typically covers civil liability arising from professional services. This includes negligence, errors or omissions, breach of professional duty, and some forms of unintentional breach of confidentiality or intellectual property. Defence costs are usually covered in addition to or within the limit. Policies are normally written on a claims-made basis, which means the policy in force when a claim is made is the one that responds, not the policy that was in place when the work was performed.

Common exclusions include deliberate wrongdoing, fraud, bodily injury or property damage unless arising from professional services in specific contexts, and prior known circumstances. Contractual guarantees beyond common law negligence may not be covered unless agreed by insurers. Excesses apply and can be significant. Extended reporting periods or retroactive dates can help deal with work done in the past, but you must check how far back cover applies.

Real-world example: an accountant makes an error in a tax submission that leads to penalties for a client. The client claims for the penalty and additional costs. The PI policy may pay for legal defence and the settlement, subject to policy terms. Another example: a chartered surveyor faces an allegation relating to fire safety assessments. Fire safety exposures remain a key underwriting concern after the Grenfell tragedy, so terms and conditions require careful review.

Claims typically begin with you notifying the insurer as soon as you become aware of a claim or a circumstance that may give rise to one. Insurers then appoint or approve legal representation, assess liability, and negotiate settlement where appropriate.

Who it suits - and when you might not need it

PI is valuable for professionals who provide advice, design, or specialist services where clients rely on your expertise. This includes solicitors, accountants, architects, engineers, surveyors, consultants, designers, IT contractors, and many regulated roles. In 2025 the solicitors market has seen improved capacity and choice, supporting competitive terms for many firms with clean records. Chartered surveyors also have updated minimum requirements, including cover for buildings of all sizes.

If you operate solely as an employee and your employer holds suitable PI, you may not need your own policy unless you also take on private work. If your role is purely manual with no advice component, other covers such as public liability may be more relevant. Before buying, review contractual obligations and regulator rules to confirm whether PI is required.

Choosing your cover level

1. Basic - Essential protections

   • Civil liability for professional services with core negligence cover.
   • Lower limits, higher excesses, and tighter exclusions to control cost.
   • Suitable for micro firms or freelancers with low fee income and simple contracts.

2. Standard - Broader day-to-day protection

   • Higher limits with defence costs included and standard extensions, such as unintentional IP infringement or breach of confidentiality.
   • More generous retroactive cover subject to disclosure.
   • Fits small to medium firms, especially where clients require proof of PI.

3. Enhanced - Comprehensive with fewer exclusions

   • Higher aggregate limits, lower excess options, and flexible territories and jurisdictions if needed.
   • Potential inclusion of loss mitigation and public relations costs.
   • Best for firms with complex contracts, overseas clients, or higher claim severity potential.

4. Optional add-ons and features

   • Run-off cover for when a business closes or a partner retires.
   • Extended reporting periods beyond standard policy terms.
   • Cyber liability for advice-related data breaches and confidentiality losses.
   • Collateral warranties and deed work support, mindful of long limitation periods.
   • Project-specific endorsements where clients demand bespoke terms.

Pricing - and what shapes it

Below are typical influences on UK PI premiums. Figures are indicative ranges only. Actual pricing varies by insurer, profession, claims history, and risk controls.

Can you apply - key eligibility points

Most UK businesses offering professional services can apply for PI. Insurers will ask about your legal structure, fee income, services provided, client mix, jurisdictions, and subcontracting. They typically request details of risk controls such as engagement letters, quality assurance, file reviews, CPD, and conflict checks. Evidence of a clean claims history, or clear explanations for past matters, helps underwriters assess your profile fairly.

You may be declined if you have undisclosed claims, provide services outside your competence, accept onerous contractual guarantees, or operate in a high-risk area without suitable controls. Construction professionals with significant fire safety exposure, for example, may face tighter terms. Where required by regulators, such as for solicitors or chartered surveyors, minimum limits and specific endorsements must be met to maintain compliance.

From quote to claim - simple steps

1. Gather key facts on services, fees, clients, and prior claims.
2. Request quotes from multiple insurers or a specialist broker.
3. Compare limits, exclusions, retroactive dates, and excesses carefully.
4. Confirm any regulatory minimums and client contract requirements.
5. Provide accurate disclosures and keep supporting documents ready.
6. Buy the policy that best matches risk profile and budget.
7. Notify incidents or circumstances to insurers at the earliest sign.
8. Follow the claims handler’s guidance and keep records organised.

Weighing it up - benefits and drawbacks

Before you commit - essential checks

Review the limit of indemnity carefully and decide whether you need any one claim or aggregate limits. Confirm the excess and how it applies to defence costs. Check the retroactive date to ensure your historical work is included. Read exclusions and endorsements line by line, especially for fire safety, cladding, or high-rise work. Understand how to notify circumstances promptly, as delays can affect cover. Budget for renewal and potential changes in terms if your risk profile or fee income changes. Keep engagement letters, scopes, and change control documented to support any future claim.

Alternatives and related cover

1. Public liability - For third party injury or property damage not arising from advice.
2. Employers’ liability - Legal requirement for most UK employers to cover employee injury.
3. Cyber insurance - For data breaches, ransomware, and regulatory notification costs.
4. Directors’ and officers’ liability - For claims against company directors and officers.
5. Legal expenses insurance - For certain contract disputes and employment issues.
6. Property and business interruption - For physical damage and loss of revenue.

FAQs

Q: Is PI insurance mandatory in the UK? A: It depends on your profession and contracts. Many regulators, like those for solicitors and chartered surveyors, require minimum cover. Even when not mandated, clients often expect it.

Q: How much cover do I need? A: Consider your largest contract value, potential error severity, regulatory minimums, and client requirements. Many firms buy limits that reflect worst-case defence costs plus a realistic settlement.

Q: Are rates really falling? A: Market conditions improved in 2024 and 2025, with rate reductions in London and across the UK for well-managed risks. Savings vary by profession and claims history, so comparisons are still essential.

Q: What is a retroactive date? A: It is the date from which your past work is covered. If the retroactive date is recent, older projects may be excluded. Many policies can include unlimited retroactivity if fully disclosed.

Q: Do I need run-off cover when I retire or close? A: Yes, because PI is claims-made. Claims can arise years later, especially where work is done under deeds with long limitation periods. Run-off maintains protection after trading stops.

Q: How do fire safety issues affect PI? A: Insurers closely scrutinise fire safety exposures following UK litigation and regulatory action. Terms may include specific exclusions or higher premiums for certain construction-related services.

Q: Are emerging risks like AI relevant to PI? A: Yes. Use of generative AI and changed working practices can create new liability pathways. Clear documentation, supervision, and client communication help manage exposures and maintain insurability.

What you can do now

Take a moment to map your services, contracts, and largest exposures. Compare quotes from several insurers or a specialist broker, checking limits, exclusions, and retroactive dates. Choose a policy that fits your real risk and budget, not the cheapest headline. Keep records tidy so notifying any circumstance is straightforward.

Important information

This guide is general information, not personal financial advice. Policy terms vary by insurer and profession. Always read your schedule, wording, and endorsements carefully, and seek regulated advice if you are unsure about suitability.