Professional indemnity insurance
With a professional indemnity insurance (Beroepsaansprakelijksheidsverzekering, BAV) you are insured against the risk of indemnity. This is when your client or customer suffers financial loss due to a professional error on your part.
For whom is professional indemnity insurance useful?
Professional indemnity insurance is especially useful if you are self-employed and advising others, or if the progress of major projects depends on your input.
Example
Suppose you are a tax advisor and you make a mistake in a tax return calculation. Or you are an IT professional and because of your mistake it takes months for a website to go live. In that case, your customer can hold you liable for the financial damage they have suffered as a result. The professional indemnity insurance insures you against the costs that you then have to pay.
Is it mandatory?
Professional indemnity insurance is only required by law for certain professions. For example, for financial advisors. Other professional groups that are required by law to take out a professional indemnity insurance are lawyers, civil-law notaries, accountants, and architects. In addition, there are various professional and business organisations that require insurance. Increasingly, clients or intermediaries demand that entrepreneurs take out their own indemnity insurance before they start working for them. Governments also usually require professional indemnity insurance for awarding contracts.
What is usually covered by professional indemnity insurance?
- (financial) damage as a result of a professional error
- loss of documents in your control
- costs of defence in the event of unjustified claims
What is usually not insured?
- Costs you incur to redo your work.
- Damage caused by intent and recklessness.
- Damage caused by crimes, such as fraud and theft.
What is the difference between Professional indemnity and Business liability?
Business liability involves any damage you or your employees, company, products or services cause to others. With professional indemnity, the damage is always directly related to your profession. You make a professional error that causes financial damage. For example, if you are a tax consultant giving wrong advice.