Professional Indemnity Insurance

Professional indemnity insurance covers errors or omissions resulting in financial loss to a third party. This comprehensive protection includes several key areas:

Legal costs: Coverage for defending your business against claims, including lawyer fees, court costs, and settlement fees, whether the claim is valid or not. If a client alleges that your advice or service led to their financial loss and takes legal action, these costs can quickly escalate. Most policies include legal defence costs outside the indemnity limit, covering the costs of defending a claim even if the claim is found to be without merit.

Breach of Professional Duty: If you fail to meet the standards of your industry and a client suffers a loss as a result, this insurance can cover you. For instance, if you're a financial adviser and you fail to follow due diligence when advising a client on an investment, leading to a significant financial loss for the client, your professional indemnity insurance can step in to cover the costs associated with the claim. This protection helps maintain your professional reputation and credibility.

Negligence: Covers errors or oversights in your work. If you accidentally provide incorrect advice to a client that leads to a financial loss, your policy can cover the legal costs and potential compensation you might have to pay. Additionally, it's crucial to have coverage against the risk of incurring significant legal fees due to professional mistakes or misinterpretations, especially in cases of unsatisfactory advice, design, or specification.

Professional indemnity premiums are calculated on several different factors including:

• Limit of cover: The maximum amount your policy will pay for a claim. Higher limits provide greater protection but cost more.
• Type of industry: Different professions carry different risk levels. High-risk professions like legal, engineering, or financial services typically face higher premiums.
• Number of employees: Larger teams may increase potential exposure to claims, affecting your premium.
• Turnover: Higher revenue businesses may face larger claims and therefore pay higher premiums.
• Claims history: A clean claims record can help reduce premiums, while previous claims may increase costs.
• Years of experience: Established businesses with proven track records often receive more favourable rates than start-ups.

Professional indemnity insurance in NZ typically costs between $50 to $100 per month, covering both the cost of a claim for compensation that a business is legally liable to pay, as well as the costs of defending a claim.

What Is Professional Indemnity Insurance?

Professional indemnity insurance (PI insurance) is a type of business insurance designed to protect professionals and businesses against claims made by clients who allege that your advice, services, or work caused them a financial loss. Whether the claim is valid or not, the cost of defending yourself can be substantial — and without the right cover in place, those costs fall entirely on you.

In New Zealand, professional indemnity insurance is an essential safeguard for anyone who provides advice, expertise, or professional services to clients. From accountants and engineers to IT consultants and marketing agencies, PI insurance ensures that a single mistake — or even an unfounded allegation — doesn't threaten your business's financial stability or hard-earned reputation.

Who Needs Professional Indemnity Insurance?

If your business provides professional advice or services to clients, you likely need professional indemnity insurance. While some professions are legally required to hold PI insurance as a condition of their licence or professional membership, many others benefit greatly from having it in place.

Common professions that benefit from PI insurance in New Zealand include:

• Accountants and financial advisers — who provide advice that directly impacts clients' financial decisions
• Lawyers and legal professionals — where errors in documentation or advice can have significant legal consequences
• Engineers and architects — where design flaws or specification errors can result in costly claims
• IT consultants and software developers — who may be held liable for system failures, data breaches, or project delays
• Real estate agents and valuers — who advise clients on significant financial transactions
• Management consultants and business advisers — whose recommendations directly influence client business decisions
• Marketing and communications professionals — who may face claims related to copyright infringement or reputational harm
• Healthcare professionals and therapists — who provide advice that can affect a client's wellbeing
• Building inspectors and surveyors — who assess properties and whose reports clients rely upon for major purchases

Even if your profession isn't listed here, if you provide any form of expert advice or professional service, PI insurance is worth considering seriously.

What Does Professional Indemnity Insurance Cover?

Professional indemnity insurance is designed to cover the financial consequences of claims made against you for alleged professional wrongdoing. A quality PI policy typically covers:

• Legal defence costs: Whether a claim is valid or not, the cost of hiring solicitors and defending yourself in court can be enormous. PI insurance covers these defence costs, often outside the indemnity limit so your coverage isn't eroded by legal fees.
• Compensation payments: If a client successfully proves that your advice or service caused them financial loss, your policy will cover the compensation you are legally liable to pay.
• Negligence claims: Mistakes happen — even to the most careful professionals. If an error in your work leads to a client suffering a financial loss, PI insurance steps in to cover the resulting claim.
• Breach of professional duty: If you fail to meet the accepted standards of your profession and a client suffers as a result, this coverage protects you from the associated costs.
• Misleading or deceptive conduct: Claims arising from allegations that your advice or representations were misleading, even if unintentionally so.
• Intellectual property infringement: Accidental use of copyrighted materials, trade secrets, or other intellectual property in your work.
• Breach of confidentiality: Unintentional disclosure of confidential client information.
• Lost documents: Costs associated with the loss or damage of client documents in your care.

What Isn't Covered by Professional Indemnity Insurance?

It's equally important to understand the limitations of PI insurance so you're not caught off guard at claim time. Professional indemnity insurance generally does not cover:

• Intentional or fraudulent acts: Any deliberate wrongdoing, dishonesty, or fraud is excluded from coverage.
• Bodily injury or property damage: These are covered under public liability insurance, not PI insurance.
• Employment disputes: Claims made by employees (such as unfair dismissal) are covered under separate employment liability policies.
• Known claims or circumstances: Any claims or circumstances you were already aware of before taking out the policy are typically excluded.
• Criminal fines or penalties: Regulatory fines or criminal penalties are not covered.

Gerrards can help you identify any coverage gaps and ensure you have the right combination of policies to protect your business fully.

Professional Indemnity vs. Public Liability Insurance

Many business owners confuse professional indemnity insurance with public liability insurance. While both are important forms of business protection, they cover very different risks.

Professional indemnity insurance covers financial losses arising from your professional advice, expertise, or services. It responds to claims that your work caused a client a financial loss.

Public liability insurance covers claims for bodily injury or property damage caused to third parties as a result of your business activities. For example, if a client trips and falls at your office, public liability insurance would respond.

Many businesses — particularly those that interact with clients in person AND provide professional advice — benefit from holding both types of cover. Gerrards can package these together for comprehensive, cost-effective protection.

Understanding Claims-Made Policies

Professional indemnity insurance is typically written on a claims-made basis. This means the policy responds to claims that are made and reported during the policy period, rather than when the alleged incident occurred.

This has an important practical implication: if you cancel your PI insurance, you may lose coverage for incidents that occurred while you were insured but are only claimed against you later. This is why run-off cover is so important.

Run-Off Cover: Protection After You Stop Trading

Run-off cover extends your professional indemnity protection beyond the active life of your business. If you retire, close your business, or change professions, run-off cover ensures that any claims made after you stop trading — but relating to work you performed while in practice — are still covered.

Without run-off cover, you could face a significant claim years after closing your business with no insurance protection in place. Gerrards can arrange run-off cover as part of your PI insurance package, giving you genuine peace of mind long after you've moved on.

How Much Does Professional Indemnity Insurance Cost in NZ?

Professional indemnity insurance premiums in New Zealand typically range from $50 to $100 per month for many professionals, though this can vary significantly depending on your specific circumstances. The key factors that influence your premium include:

• Profession and risk profile: Higher-risk professions such as law, engineering, and financial advice attract higher premiums due to the potential magnitude of claims.
• Limit of indemnity: The maximum your insurer will pay per claim or in aggregate over the policy period. Higher limits provide greater protection but increase premiums.
• Business turnover: The more revenue your business generates, the larger the potential claims exposure — and the higher your premium may be.
• Number of employees: More staff means more opportunities for errors, which is reflected in the premium calculation.
• Claims history: A history of previous claims can increase your premium, while a clean record often attracts discounts.
• Years in business: Established businesses with proven track records often receive better rates than start-ups.

At Gerrards, we work with 20+ A-rated insurers to find you the most competitive premium for the coverage you need. We do the shopping so you don't have to.

Mandatory Professional Indemnity Requirements in New Zealand

For certain professions in New Zealand, professional indemnity insurance is not optional — it is a legal or regulatory requirement. These include:

• Licensed financial advisers under the Financial Markets Conduct Act 2013
• Lawyers regulated by the New Zealand Law Society
• Real estate agents under the Real Estate Agents Act 2008
• Building practitioners in certain contexts under the Building Act 2004
• Chartered accountants and members of Chartered Accountants Australia and New Zealand (CA ANZ)

Even if your profession doesn't mandate PI insurance, many clients — particularly larger organisations and government agencies — will require you to hold it as a condition of contract. Having PI insurance in place not only protects you; it also makes your business more attractive to prospective clients.

Why Choose Gerrards for Your Professional Indemnity Insurance?

Gerrards Insurance Brokers is an independent New Zealand insurance brokerage with access to more than 20 leading insurers. As an independent broker, we work for you — not the insurance companies — which means our advice is always in your best interest.

When you choose Gerrards for your professional indemnity insurance, you benefit from:

• Expert, impartial advice from brokers who understand the specific risks facing NZ professionals
• Access to 20+ A-rated insurers ensuring you get competitive cover from financially strong companies
• Same-day proof of insurance certificates available when you need cover quickly
• Tailored policies designed around your specific profession, business size, and risk profile
• Ongoing support at renewal and throughout the life of your policy — including claims assistance when you need it most
• Run-off cover options for when you retire or close your business

Get Professional Indemnity Insurance Today

Protecting your professional reputation and business finances doesn't have to be complicated or expensive. With cover starting from as little as $50 per month and same-day certificates available, getting the right PI insurance in place is straightforward when you work with Gerrards.

Contact our team today on 0800 374 691 or request a quote online. We'll take the time to understand your business, compare options from our panel of top insurers, and find you a policy that gives you real confidence — so you can focus on doing what you do best.