Professional indemnity insurance
Professional indemnity insurance (Beroepsaansprakelijksheidsverzekering, BAV) covers you if you are held liable for a mistake in your work. For example, if you give incorrect advice or make a mistake in a design, your client may suffer financial loss as a result. Find out when liability arises, when this insurance is compulsory, and what types of loss are covered.
On this page
- When do you need professional indemnity insurance?
- When are you liable?
- What sort of damage can you be held liable for?
- What is the difference between financial and material damage?
- Is professional indemnity insurance mandatory?
- What is usually covered by professional indemnity insurance and what is not?
- What is the difference between professional liability insurance and business liability insurance?
- Professional indemnity insurance in brief
- Frequently asked questions about professional indemnity insurance
When do you need professional indemnity insurance?
You need this insurance if you carry out work where an error could result in financial loss for your client. This is particularly likely in professions where you provide advice, carry out calculations, or make decisions on behalf of others. For example:
- advisers and consultants
- IT service providers
- architects and designers
- lawyers and financial service providers
When are you liable?
Liability arises if, according to your client:
- a professional error has been made
- terms of an agreement have not been fulfilled
- financial loss has resulted from your actions, or lack of action
Whether you are liable depends on the circumstances and the agreements made. Liability is separate from the question of whether you are insured.
Example of a professional mistake
A tax adviser prepares a tax return for a client. In doing so, a tax deduction is applied incorrectly. The Netherlands Tax Administration corrects the return, resulting in the client having to pay additional costs. The client may hold the tax adviser liable for this.
What sort of damage can you be held liable for?
Professional liability relates to financial loss. It does not cover physical injury or damage to property. Examples of financial loss include:
- loss of earnings
- additional costs incurred
- financial consequences of delays
What is the difference between financial and material damage?
The difference between financial and material damage is:
- financial damage: loss of money, without physical damage. Professional indemnity insurance only covers financial damage.
- material damage: damage to property, buildings, or possessions. For material damage, you will usually need business liability insurance (bedrijfsaansprakelijkheidsverzekering).
Is professional indemnity insurance mandatory?
Professional indemnity insurance is mandatory for a number of professions, either by law or as required by the relevant professional body. These are:
- accountants
- solicitors
- architects
- financial advisers
- civil-law notaries
Clients sometimes require proof of indemnity insurance
Various professional and business organisations or intermediaries demand that entrepreneurs take out their own indemnity insurance before they start working for them. For example, in these situations:
- larger or long-term assignments
- work is subject to contractual terms
- sectors with established industry agreements
Governments also usually require professional indemnity insurance for awarding contracts. The contract will usually specify exactly what you are required to insure.
Take the KVK Insurance Check
Every business owner needs different types of insurance. Some are compulsory, others are useful. The KVK Insurance Check helps you choose the right insurance policies. To the check
What is usually covered by professional indemnity insurance and what is not?
The policy terms and conditions state which financial losses arising from professional negligence are covered and what is not covered. Damage to people or property is not usually covered. The specific terms vary from one insurance policy to another.
- (financial) damage as a result of a professional error
- loss of documents in your control
- costs of legal defence in the event of unjustified claims
- Costs you incur to redo your work.
- Damage caused by intent and recklessness.
- Damage caused by crimes, such as fraud and theft.
Read the policy conditions
What is covered and what is not depends on your insurance company and insurance policy. Always read the policy carefully. You can also ask an independent insurance advisor for advice.
What is the difference between professional liability insurance and business liability insurance?
Both types of insurance cover different kinds of loss.
- Professional liability insurance covers financial loss arising from professional errors, such as giving incorrect advice.
- Business liability insurance usually covers damage to people or property, such as personal injury or damage to property.
Read more about business liability insurance
Professional indemnity insurance in brief
- Professional indemnity insurance covers financial loss resulting from professional errors
- it does not cover damage to persons or property
- liability may arise, for example, from an error, negligence, or incorrect advice
- the insurance is usually not mandatory
- clients may want this insurance to be included in a contract
- what is and is not covered is stated in the policy terms and conditions
- professional indemnity insurance is different from business liability insurance
Frequently asked questions about professional indemnity insurance
Yes. Liability for professional mistakes does not depend on the legal structure of your business.
It usually does. This is set out in the policy conditions.
Usually, yes. This is stated in the policy terms and conditions.
Usually, yes. This is stated in the policy terms and conditions.
Whether you are liable is determined by:
- you and the client together: sometimes you can reach a mutual agreement, for example based on terms in the contract
- a court: if you and the client cannot agree, a court may determine whether you are liable
- a disputes resolution body or arbitration: in some sectors, it has been agreed that a dispute will be handled by a special committee
An insurer only assesses whether a claim is covered under the terms of the policy. The insurer does not decide whether you are legally liable.
Professional negligence is an error, omission or wrongful act committed in the course of work that results in financial loss to a client.