As a small business owner, you do everything you can to make your clients' lives better. Whether it's creating, fixing or transforming the space they live or work in, helping them look and feel their best or providing a warm and nurturing environment for their children, their happiness and satisfaction are your #1 priority. You're good at what you do, and you make every effort to do the job right.
Still, even the most skilled and experienced professionals sometimes slip up. To err is human, right? And you want to make sure that both your business and your clients will be taken care of in the unlikely event that something goes wrong.
That's what indemnity insurance is for.
What Is Indemnity Insurance?
So what is professional indemnity insurance? It's a type of insurance that can protect your business financially if someone claims that you caused them harm due to a professional mistake. This type of insurance is also sometimes called professional liability insurance.
What's the Difference Between Professional Indemnity Insurance and Professional Liability Insurance?
The terms are more or less interchangeable, though of course the details vary from one policy to the next. "Professional indemnity" is more commonly used in the UK, whereas "professional liability" is more common in the US.
So what's the difference between the terms? The word "indemnity" refers to the protection your client should have against loss or damage that you might cause, while "liability" refers to your state of being responsible for granting your client that protection or compensating them if they are harmed. So the terms refer to different aspects of the issue, but the type of insurance they refer to is essentially the same.
Public Liability and Indemnity Insurance
You may also have seen the phrase "public indemnity insurance," and it's a bit confusing because the types of insurance generally break down as public liability insurance and professional indemnity insurance.
Public liability is the responsibility you have to avoid causing general damage to others--with no connection to your professional expertise. We expect people to take responsibility if they cause damage to someone else. Let's say you're a plumber and someone hired you to fix a leaky pipe. You do a great job, but just as you're turning to leave, you knock over a fancy vase and it shatters on the floor. The same thing could have happened to any visitor to this home--it has nothing to do with your profession. But because you're in that home in a business capacity, it's your business that will need to take responsibility for the damage. Public liability insurance, also known as general liability insurance, can cover your plumbing business for example, in cases like these: accidents that aren't necessarily professional mistakes, but still might be blamed on your business.
Professional liability or professional indemnity refers to the added responsibility you have as a professional in your field. People trust you as an expert, and they pay you expecting that you'll provide expert service. For example, you may have a friend who's been practicing yoga for years but has never trained as an instructor. He invites you to do some yoga with him, and you lean a little too hard into your pigeon pose and end up tearing a ligament. The injury is not your friend's responsibility, because he's not a professional--and you were never under the impression that he was. In terms of liability, this situation is just the same as if you were doing yoga all on your own.
But if you're a certified yoga instructor, your certification means that you've received the training necessary to prevent your students from harming themselves, and that's why people pay to come to your classes. You can't always control what your students are doing, no matter how clear and careful your instructions are. Nonetheless, if a student tears a ligament during pigeon pose, she still might claim that you should have prevented the injury because of your professional capacity.
Small business professional indemnity insurance can help protect your business in a situation like that one.
Benefits of Small Business Indemnity Insurance
So why is it a good idea to purchase indemnity insurance for your business? How might having it benefit your business?
Legal and Financial Protection
Making sure your business is protected against financial losses is especially important for a small business, because you can't absorb major losses the way big corporations might be able to. Having business insurance gives you the peace of mind that comes from knowing that in the unlikely event that you slip up, you won't go bankrupt and you'll be able to continue growing your business and making your clients happy.
It may seem that acknowledging the possibility that you might make a mistake indicates a lack of confidence in your abilities--but actually, the exact opposite is true. Having professional insurance that covers every kind of scenario shows your clients that you are serious about your business, and it gives you an edge on your competitors who don't have this kind of insurance.
Relationship with Clients
Having a good insurance policy also shows your clients that you care about them and are doing everything in your power to ensure that they will be taken care of if something goes wrong. That's a powerful message to send that can significantly improve your customer relationship and help your business grow..
Does Your Business Need Indemnity Insurance?
A solid professional indemnity insurance policy can help professionals in a wide variety of fields. Since we specialize in tailoring insurance policies to small businesses like yours, we've done exhaustive research to determine what kinds of insurance most benefit professionals in the various fields. We believe that professional indemnity insurance is a must for the following professions:
- Contractors & construction professionals such as handymen, general contractors, carpenters, landscapers, plumbers, electricians, HVAC professionals, drywall installers, roofers, painters, tree trimmers, flooring professionals, masons, snow plow operators, tree surgeons, appliance technicians and lawn care professionals
- Consultants of all kinds
- Fitness professionals such as personal trainers, yoga instructors, golf instructors, dance teachers, CrossFit instructors, fitness instructors, Zumba instructors, Pilates instructors, spin instructors, aerobics instructors and so on
- Beauty professionals such as barbers, hair stylists, estheticians, nail technicians, cosmetologists and beauticians
- Therapists such as massage therapists
- Entertainment professionals such as event planners
- Educators such as day care and child care professionals and tutors
To find out more about professional liability insurance/indemnity insurance and how it can help protect your business, check out our Professional Liability Insurance page.