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Business Insurance Hero

Professional Indemnity vs Directors and Officers Insurance

Understanding Professional Indemnity vs Directors and Officers Insurance

So you have researched the business insurance your company needs to minimise risk and protect your employees from potential legal claims. You may have come across both Professional Indemnity Insurance and Directors and Officers Insurance. 

You may be asking yourself exactly, what is the difference between both forms of insurance and if your company needs either? We have put together a handy guide so that you can better understand these types of insurances.

What is Professional Indemnity Insurance?

Professional Indemnity Insurance, otherwise known as Professional Liability Insurance, is an insurance policy designed for all staff offering a specialised service and the self-employed. It protects from the cost of compensating clients for loss or damage resulting from negligent services or advice provided.

As a business owner you can do everything to prevent poor customer service but disagreements and mistakes are always a possibility. Professional Indemnity Insurance covers the legal fees and compensation costs in setting these things right again.

It is important to learn that compensation claims can be brought against you even if you provided a service or offered advice for free. 

What is Directors and Officers Insurance?

Directors and Officers Insurance covers the cost of compensation claims made against business directors and other managerial staff stemming from decisions and actions taken within the scope of their duties. 

Even trusted and experienced staff can make mistakes. Directors and Officers Insurance protects managers against the consequence of genuine or alleged “wrongful acts”. Wrongful acts can include a breach of trust, neglect, error, and misleading statements to name a few.

The difference between Professional Indemnity Insurance and Directors and Officers Insurance

The differences between both types of insurances can be more clearly outlined by addressing the following three questions:

Who does the insurance protect?

Both forms of insurance act to protect individuals working within the business, but the individuals differ. 

Directors and Officers Insurance provide protection to the company’s directors or senior management against a claim made against those individuals and their management decision.

Professional Indemnity Insurance provides cover to any member of the organisation that offers a specialised service if a claim is made against them for errors or omission in the delivery of service. An example would be if an accountant offers bad advice that leads to a financial loss or the surgeon of a practice performs a surgery incorrectly.

Who is filing the claim?

Directors and Officers Insurance - the claims are commonly filed by a variety of sources that include: regulators, employees, shareholders and creditors. 

Professional Indemnity Insurance -  the claims are filed by a client or customer who finds issue with the provider of services.

What does the insurance cover?

Directors and Officers Insurance - covers claims directly related to the decisions/actions of senior management. This includes cover related to stock performance, mismanagement, employment practices and failing to follow laws and regulations of the board. This insurance does not cover bodily injury or property damage.

Professional Indemnity Insurance - does negligent acts that may result in bodily injury as well as acts that may result in a financial loss.

So, what business insurance does my company need?

Many companies choose to get both insurance policies. This is advisable if you operate a business where both the company directors/senior management and specialised services are equally at risk of a compensation claim.

Business Insurance needs to be tailored to the unique needs and operations of your business. That is why you should get in touch with Abbey Autoline’s business specialist at 08000 66 55 44 today.

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