Cheapest Isn't Always the Best: What to Check Beyond The Price When Getting PI Insurance

At a glance

• The cheapest Professional Indemnity insurance quote isn't automatically the most suitable, just as a higher premium doesn't necessarily mean better cover.
• Compare premiums against the limit of indemnity, excess and professional activities covered to understand what you are getting for the price.
• Exclusions and policy conditions can affect whether particular professional activities, circumstances or claims are covered.
• Claims-made terms and retroactive dates are particularly important when changing insurers or arranging cover after a gap.
• Client requirements, geographical conditions and access to proof of cover can also affect whether a PI policy suits the way you work.

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Price is often the first thing we look at when comparing insurance policies, and that applies to Professional Indemnity (PI) insurance as well. When two policies appear to cover the same type of work, choosing the lower premium can seem like the obvious way to reduce business costs.

But the premium alone does not tell you whether two policies offer comparable protection. The amount of cover, excess, professional activities insured, exclusions, retroactive dates and conditions affecting previous work can all differ between policies and make a noticeable difference.

This does not mean cheaper PI insurance is necessarily unsuitable, or that paying more automatically gives you better protection. When comparing professional indemnity insurance in Australia, look beyond the premium to what the policy provides and whether it matches the work you actually do.

Before choosing a policy, check the following details alongside the premium.

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The Premium, Total Cost and Limit of Indemnity

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Start by checking what you will actually pay. The headline premium may not be the final amount once you add applicable taxes and charges, so compare the total payable amount shown on each quote.

Next, compare the limit of indemnity. This is the maximum amount available under the policy for an eligible claim, subject to the policy terms, conditions and exclusions. Check whether defence costs are included within this limit or provided in addition to it, as this can affect how much of the limit remains available for compensation or settlement. 

A policy providing $1 million in cover should not be compared on premium alone with one providing $5 million. The policies provide different levels of financial protection, so the difference in cover should be considered alongside the difference in price. 

The limit you need depends on the nature and value of your professional work, the potential financial consequences of a claim and any minimum insurance requirements in your contracts. For a more meaningful price comparison, compare quotes with the same or similar limits.

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Your Professional Activities and Where You Work

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Your PI insurance policy needs to reflect the actual professional services you provide. Your occupation title may describe your primary work, but it may not reflect every professional service you provide. 

For example, a graphic designer who produces visual assets but also provides consulting services should disclose the full range of services they provide when arranging cover rather than assume they are all automatically included.

Where you work can also affect your cover. PI policies may include territorial conditions that specify where insured work can be performed, as well as jurisdictional conditions that determine where legal proceedings can be brought. 

These conditions are particularly relevant when working with overseas clients or providing services outside Australia. When comparing PI insurance in Australia, check that both your professional activities and the policy's geographical scope match how your business operates.

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The Excess and When It Applies

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The excess is the amount you may need to contribute towards an eligible claim, depending on the policy terms.

For example, two policies may offer the same limit of indemnity but carry different excesses. The policy with the lower annual premium may require a larger contribution if you need to claim.

How the excess applies can also differ. Depending on the policy wording, it may apply to compensation, defence costs or other claim expenses. When comparing policies with similar premiums, check both the excess amount and how it applies.

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What the Policy Covers and Excludes

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Similar premiums and cover limits do not necessarily mean two PI policies protect against the same risks.

Professional Indemnity insurance may cover eligible claims arising from allegations that your professional advice or services caused a client or third party financial loss. Depending on the policy, cover may also include eligible investigation and legal defence costs. 

Exclusions identify circumstances, activities or claims that fall outside the policy. These can include known claims or circumstances, deliberate or dishonest conduct and certain contractual liabilities, although exclusions vary between policies.

Pay particular attention to exclusions that apply to professional services you provide. An exclusion relevant to a core part of your work can be more significant than a modest difference in premium.

For a broader breakdown of inclusions and exclusions, see What Does Professional Indemnity Insurance Cover and What It Does Not?

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The Claims-Made Basis and Retroactive Date

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Professional Indemnity insurance is generally written on a claims-made basis. This means the policy in force when a claim is first made and notified will generally be the relevant policy, subject to its terms and conditions, rather than the policy you held when the work was completed.

This makes the retroactive date particularly important because it determines how far back eligible professional work may potentially be covered under the current policy.

Suppose you completed work for a client two years ago and the client raises a claim after you have moved to another insurer. The retroactive date under your current policy can affect whether that earlier work falls within the relevant period of cover.

When comparing a cheaper new policy, check that its retroactive arrangements do not leave previous work outside the period of cover, particularly if you are switching insurers or have had an insurance gap.

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Client and Contract Requirements

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Sometimes the amount or type of PI cover you need depends partly on the organisations you work with.

Clients, agencies, professional bodies and commercial contracts may require you to maintain Professional Indemnity insurance. A contract might also specify a minimum limit of indemnity or other insurance conditions you must meet before work begins.

A lower-priced policy therefore offers little practical advantage if it doesn't meet a requirement attached to your contract.

Consider both your existing requirements and the type of work you expect to pursue. If larger clients or contracts commonly require higher PI limits, consider these requirements when requesting a PI insurance quote.

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Proof of Cover and Claims Process

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A Certificate of Currency confirms that your insurance is active and shows key policy details. Clients and other third parties may request one before allowing you to begin work, so the process and timeframe for obtaining it can be important when a project start date depends on providing proof of cover.

Sami’s entire quote-to-cover process is online, so eligible businesses can arrange cover and receive a Certificate of Currency when cover starts, without waiting for paperwork.

The claims process is another practical difference to check between providers. Look at how a potential claim is notified, who you need to contact, what information you are expected to provide and what support is available once the claim has been lodged. Knowing this before you buy means you understand the steps you will need to take if a client later makes an allegation or claim.

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Price is an important factor when choosing Professional Indemnity insurance, but it is only one part of the comparison. The insured activities, limit of indemnity, excess, exclusions, retroactive arrangements, geographical conditions and contractual requirements can all affect whether a policy suits your business. A lower-priced policy can still be suitable if these features align with your professional activities and requirements.

Sami Insurance offers PI insurance for eligible sole traders, freelancers and small businesses, with cover up to $10 million and prices starting from approximately $3 per week for eligible occupations. Get a quick quote online to see the cover options available for your occupation.

Cover is subject to eligibility and applicable policy terms, conditions, limits and exclusions.

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FAQs

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What happens to Professional Indemnity insurance if you close your business?

A Professional Indemnity claim can arise after you stop trading if it relates to professional work you completed previously. Run-off cover may respond to eligible claims arising from past work after your regular PI policy ends, subject to the terms of the run-off cover. The availability, duration and terms of run-off cover vary between insurers and policies.

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Can you increase your Professional Indemnity insurance limit during the policy period?

You may be able to increase your limit of indemnity if your insurance needs change, such as when taking on a contract that requires a higher level of cover. Any increase is subject to the insurer’s approval and underwriting requirements and may affect your premium and policy terms.

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Should I cancel my existing PI insurance as soon as I buy a new policy?

Avoid cancelling your existing PI insurance until you understand when the new policy starts and how it treats your previous professional work. Because PI insurance is generally written on a claims-made basis, a gap in cover or different retroactive arrangements may affect claims relating to earlier work. Check the dates and terms of both policies before switching.