Professional Services

Professional Indemnity Insurance protects businesses and individuals who provide professional services, advice, or expertise. It covers the cost of defending claims and paying compensation if a client alleges your work caused them financial loss, property damage, or injury. The definition of a “professional service” or a “professional” is still debated across insurers, but typically requires a higher level of education, a specialized and extensive knowledge base, and relevant industry experience compared to the average person. Depending on your field, this often looks like minimum 3 years’ industry experience, and a tertiary qualification in that field.

In Australia, many professionals are legally or contractually required to hold Professional Indemnity Insurance. For example, financial advisers, accountants, engineers, real estate agents, IT consultants, and health professionals often need cover before they can trade, bid for contracts, or hold a professional licence.

At its core, Professional Indemnity Insurance helps you continue operating your business even when legal disputes arise. It covers legal defence costs, investigation expenses, and damages awarded against you in relation to your services provided. Without it, a single claim could jeopardise both your finances and your reputation.

When you provide advice or services, your clients rely on your expertise to make decisions. If something goes wrong you may be held fully or partially responsible even if it’s outside your control.

Consider these real-world situations:

• An IT consultant recommends a software migration that fails, leading to lost client data.
• An engineer signs off on a design later found to be flawed, causing delays and cost overruns.
• An accountant miscalculates a client’s tax obligations, resulting in penalties from the ATO.
• A real estate agent provides incorrect rental yield estimates, leaving an investor out of pocket.

In each case, the client may pursue compensation. Legal defence costs alone can run into tens of thousands of dollars, even if you are ultimately found not liable. According to the Insurance Council of Australia, professional liability claims are among the fastest-growing categories of insurance disputes.

Depending on your circumstances, you might require a more specific type of Professional Indemnity Insurance. These can include, Design & Construct policies targeting professionals in the construction industry. Information Technology targeting professionals in the IT field. Or Financial Institutions targeting fund managers, bankers, and investment advisors.

One of the most important things to understand about Professional Indemnity Insurance is that it is written on what’s called a “claims made basis.” This means the policy does not cover you based on when you did the work or gave the advice. Instead, it covers you based on when a claim is actually made against you.

For example, imagine you are an accountant who prepared tax returns for a client two years ago. At the time, you made an error that nobody noticed. Two years later, the client receives a penalty from the ATO and decides to take action against you. Even though the work was done years ago, the claim is being made today. Under a claims made policy, what matters is that you hold valid Professional Indemnity Insurance today when the claim comes in, not that you had a policy in place when you originally did the work.

Because of this structure, the retroactive date on your policy is absolutely critical. The retroactive date is the point in time from which your past professional services are covered. If your retroactive date goes back to when you first started in business, then all of your past work is covered, as long as you keep your policy active. But if the retroactive date is more recent, for example, the date you first took out cover, then anything you did before that date would not be insured if a claim comes up later.

Here is why this matters so much. If you ever cancel your policy, let it lapse, or switch to a new insurer without making sure your retroactive date carries over, you could suddenly lose cover for years of past work. A client could raise a claim for something you did long ago, and you might find out you no longer have protection. Unfortunately, many professionals only realise this after it is too late.

This is why brokers and insurers stress the importance of continuous cover. Keeping your Professional Indemnity policy active without gaps ensures you always have protection, even for advice or services delivered years earlier. Claims can take a long time to surface, particularly in industries like engineering, accounting, or consulting, where the impact of your advice might not be felt until years after the work was done.

In short, with Professional Indemnity Insurance, timing is everything. Claims made policies mean the cover applies when the claim is made, not when the work was carried out. The retroactive date ensures your past work is included, and continuous cover makes sure you do not lose that safety net. By maintaining a policy with an appropriate retroactive date, you protect yourself from both today’s risks and the possibility of older issues coming back to cause problems in the future.

Run-off cover is a special form of Professional Indemnity Insurance that continues to protect you after you stop trading, retire, sell your business, or close down your practice. Because Professional Indemnity policies are written on a claims made basis, your cover only applies if the claim is made while your policy is active. This creates a problem for professionals who are no longer working, just because you have stopped practicing does not mean past clients cannot raise claims against work you carried out years earlier.

Run-off cover solves this by extending your protection for a set number of years after you stop operating. The length of time you need depends on your profession, the type of services you offered, and the legal time limits in which claims can be lodged. For example, engineers, financial advisers, and medical practitioners often need several years of run-off cover because claims can arise long after the original work was completed.

Who should consider run-off cover? Anyone who is retiring, selling their business, changing industries, or taking a career break should think carefully about it. It is particularly important for professionals in regulated industries where client reliance on your advice is high, such as accounting, engineering, law, and health services. Without run-off cover, you could be left personally responsible for legal costs and compensation if an old client files a claim after you have closed your business. Run-off insurance gives peace of mind that your past work remains protected

At Bluewell we help Australian service professionals find simple, reliable cover for their biggest risks. Whether you work from home or run a growing firm, we’ll tailor a solution that works for how you do business.

Each policy is detailed in the Product Disclosure Statement (PDS) and Financial Services Guide (FSG). As AFSL holders, we provide these documents before arranging cover.

When you take out a Professional Indemnity Insurance policy, one of the most important things to understand is how the limits of your cover work. Two key terms you will see are “any one claim” and “aggregate limit.” These terms define how much your insurer will pay if you face claims during your policy period. The “any one claim” limit is the maximum amount the insurer will pay for a single claim. For example, if your policy has a $2 million any one claim limit, that is the most they will pay for one matter, even if the damages or legal costs exceed that amount. The aggregate limit is the total amount the insurer will pay across all claims in the entire policy year. So, if your aggregate limit is $5 million, that means all claims combined within that year cannot exceed $5 million in payouts from the insurer.

This becomes important for businesses that may face multiple smaller claims in one year, rather than a single large claim. Even if each claim is within the “any one claim” limit, they all add up toward your aggregate limit. Once the aggregate is reached, the insurer will not pay further claims for that period.

Get tailored advice and cover for your business. Whether you’re just starting out or growing a team, we’ll help protect your income, reputation, and peace of mind.