Accidents Will Happen – Professional Indemnity Insurance

 professional indemnity insurance

Most people are familiar with the basics of motor trade insurance but one area that is often misunderstood is professional indemnity insurance.

Motor traders offer a service that requires a good level of professionalism and specialist knowledge.  In the event that you would have to pay to correct a mistake or incur legal expenses as a result of your negligence, professional indemnity insurance could help you cover these costs.

If you are running a business that provides a professional service or gives advice, then it is recommended that you are fully covered against claims from clients. To make sure your business is fully financially protected, read on to find out just how professional indemnity insurance protects your business.

What is Professional Indemnity Insurance?

Professional indemnity insurance (PI) covers any legal costs and expenses that may be incurred if someone makes a claim against you for bad or dangerous workmanship or inadequate advice. It will also pay any costs awarded to third parties. Compensation claims are often made if someone suffers a financial or professional loss due to your work.

Even if you are confident in the service and advice you are providing, you could still be vulnerable to having a claim made against you.

Do I Really Need Professional Indemnity Insurance?

Within the motor trade, those with vehicle dealerships, garages and workshops, even self-employed mechanics and tyre fitters, will be offering advice as well as fixing vehicles. If a person were to have an accident as a result of your - or an employee’s - faulty workmanship, they could sue your company.  Having PI covers you for these types of incidents.

When you are covered by PI, it’s important to log all incidents that may occur and keep records of anyone that is involved. This way, if the worse were to happen, you will be prepared with the relevant facts and material to hand.

How Does Professional Indemnity Work?

Professional indemnity works differently from vehicle or road risk insurance. In the case of an accident claimed on road risk insurance, your current insurance company will pay out for a claim during that policy year. With professional indemnity, the insurance company that insures the policyholder at the time of the claim will be responsible for the pay out. Therefore keeping accurate records is incredibly important.

As indemnity insurance policy covers you on a claims-made basis, you need to include a retroactive date which covers you for work undertaken prior to the current policy year. This is generally the date you started trading or the date of your first motor dealers’ professional indemnity policy. You may come across a  retroactive date of none, which will automatically provide cover for all previous periods.

If you were to decide to close your business or retire, it’s advised to have a ‘run off’ period to protect you against future claims should they arise.


What are Levels of Indemnity?

The level of indemnity simply means the highest amount your insurance company will pay out following a claim. When taking out a policy, always make sure you have enough to cover the worst-case scenario. The levels you require will be determined by the amount of risk involved in your business. Tradex offers indemnity limits of between £250,000 and £2 million, with higher limits available on referral.

Finding the level of indemnity you need for your motor trade business is generally based upon your assessment of the risks of exposure to a claim, together with the likelihood of a claim being made. 

How Much Will Professional Indemnity Insurance Cost?

The cost of your motor dealers’ professional indemnity policy depends upon the precise nature of your business, the amount of work that is undertaken yearly, the level of experience of you and your employees, as well as any previous claims history.

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