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As a business owner, when you take on insurance for your properties, you keep updating your cover based on how much more you acquire. For example, if you insure your first house, won’t you protect the second or third? It is essential to consider how the changes in your business will affect your insurance.
Professional Indemnity insurance (PI) or Professional Liability insurance in Singapore is a cover you take to protect you as a professional and your firm from errors that may occur when you provide professional service and advice. This policy protects you from errors or omissions, professional negligence or breach of professional duty of care.
Who Needs Professional Indemnity Insurance?
Several professionals understand that their careers carry immense risks since clients and/or third parties can easily sue them. Some of these professionals include:
- Doctors
- Engineers
- Investment Managers/Fund Managers
- Accountants/Auditors
- Architects
- Lawyers/Solicitors
Although professional indemnity insurance in Singapore is not mandatory except for certain professions such as lawyers or insurance brokers, it is vital to consider the impact a lawsuit will have on you as a professional. Claims will also affect your business, especially if you do not have sufficient coverage.
Whether you own a firm or are a solo entrepreneur, your business is likely to transform over time. It is advisable to discuss with your insurer what steps to take in updating your cover to ensure that your professional indemnity insurance continues to provide adequate protection as your business expands or diversifies.
Business Expansion and Professional Indemnity Insurance
When your business was a startup, your worry was probably limited to how staff actions would likely lead to a claim. However, as your business grows, the risks will be higher. For example, if you introduce online shopping, you may need to consider the impact of cyber-crimes and how they will affect you as a professional or your business.
As an architect, have your projects become bigger, more involving and riskier? Is your professional indemnity insurance in Singapore designed to cover this level of growth?
Your business may also transform with the addition of international clients. If you took professional indemnity insurance when your clientele was primarily local, what changes do you need to make on your policy to include international coverage?
The business community is becoming more global. It is important to consider what the conditions in other countries are when it comes to international companies and professional indemnity insurance in Singapore. You need to find out from your insurer how your company’s expansion will affect the premium you are paying.
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What happens when a partnership is dissolved? This is an important question you need to ask your insurer when requesting professional indemnity insurance. Many professionals come together to form a company. It could be a law, architectural, engineering or financial firm. Should a claim be brought when the company has been dissolved yet the partners undertook the project together, what happens?
Run-off insurance cover takes care of any future claims brought after the dissolution of a company. It is vital to include this aspect when requesting professional indemnity insurance in Singapore.
Assuming an incorporated company will remain the same in the years to come means you are leaving yourself and the company at risk. A run-off cover will protect the partners who will go and those who will be left behind. More importantly, the company will not be affected by claims.
Sale of a Company
It is not uncommon to see large enterprises taking over smaller ones. Businesses are sold and bought depending on the benefit of the acquisition to the buyer. Buyers tend to take on the past liabilities of the company purchased. When selling a company or buying a business, it is essential to look at the possible liabilities and the professional indemnity insurance taken. This way, if you are retiring, you need not worry about future disturbances arising from unexpected lawsuits.
Important Considerations When Selling or Acquiring a Business
- Review the company’s past claims and known circumstances that could lead to a claim
- Assess the professional indemnity insurance coverage.
- Ensure the policy extends to potential future claims.
- Ensure the policy covers newly acquired/taken over entity
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Our Thoughts
Involving your insurer with the details of your business will help determine the level of risk your profession carries. It takes a lot longer to make a name for yourself as a professional, and a single alleged claim could be destructive.
Having professional indemnity insurance in Singapore will ensure you concentrate on your defence without worrying about the financial implications of the claim. Be sure to consider your options, whether you are a small, medium or large company. It is not too late to set up a pre-emptive defence for your business.
At Allegiance, we work with reputable insurers to offer Professional Indemnity Insurance for various professionals. Read more about the Professional Indemnity Insurance in Singapore.
Get in touch with us for a discussion and a personalised quotation for your business.
Professional Indemnity Insurance FAQs:
It covers legal defence costs, compensation claims, and can also cover public relations expenses to repair reputational damage arising from professional errors, giving your business financial protection and credibility.
If you provide professional advice or services, having professional indemnity insurance in Singapore helps protect you from potential legal and financial risks. Some professions may also require it by law.
It covers legal fees, compensation costs, and settlements arising from claims of professional negligence, errors, omissions, or breach of duty in your work.
It usually does not cover intentional misconduct, fraud, criminal acts, or liabilities covered by other insurance policies like general liability or work injury compensation insurance.
The cost varies based on factors such as your industry, coverage amount, business size/revenue, and risk exposure. Premiums are typically higher for high-risk professions.
Yes, most insurers allow businesses to tailor their coverage based on their specific risks and operational needs.
You can purchase it from general insurance companies offering business coverage. Compare policies to find one that suits your needs and budget.
Notify your insurer immediately, provide all necessary documentation, and follow their guidance on legal proceedings or settlements. It is crucial not to admit or negotiate liability with the 3rd party/claimant and just forward any correspondence or demand to your insurance company unanswered.
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