FCA authorised · FRN 724952 0117 325 0027Quote & buy →
Professional indemnity explained
A PI mismatch is where a client contract demands professional indemnity cover your policy does not provide, in limit, basis, costs, excess or jurisdiction. It matters because the shortfall can itself be a breach of contract.
Part of: Professional indemnity insurance
In short
When a contract's PI requirement does not match your policy, the usual gaps are each and every claim versus aggregate, the size of the limit, defence costs inside or outside the limit, the excess, territorial or jurisdiction limits, insurer ratings and how many years cover must run. Fix it before signing. The three routes are to negotiate the wording, change your main policy at or before renewal, or add an excess layer or project specific cover. Send your broker the clause and contract details early so options can be compared.
If a contract asks for professional indemnity (PI) insurance your policy does not provide, do not sign and hope. A PI requirement is a contractual promise, and failing to meet it can be a breach in itself, separate from any claim. Most mismatches can be fixed in one of three ways: negotiate the contract wording, adjust your policy, or buy additional cover for the project or client.
The mismatch rarely means you are uninsured. More often your cover is real but shaped differently from what the client asked for, and the client's lawyer has used a standard clause without checking what the market offers for your profession. That makes most mismatches negotiable, provided you raise them before signing and explain them clearly.
Start by putting the contract clause and your policy schedule side by side. Most mismatches fall into a handful of predictable areas, set out below. Your broker can usually tell you quickly which ones matter and what each fix is likely to involve.
| Contract says | Your policy says | Why it matters |
|---|---|---|
| £X each and every claim | £X in the aggregate | One large claim, or several smaller ones, can use up an aggregate limit for the whole year |
| Limit of £5m | Limit of £2m | The gap is uninsured if the client claims above your limit |
| Defence costs in addition to the limit | Costs inclusive | Legal costs reduce the money left for damages |
| Excess no more than a set figure | Higher excess | Clients want to know you can fund your share of each claim |
| Worldwide jurisdiction | UK only, or excluding the USA and Canada | A claim brought in an excluded court may not be covered |
| Insurer with a minimum rating | Insurer unrated or rated lower | Some clients specify financial strength ratings in procurement rules |
| Cover maintained for 6 or 12 years | Annual policy only | You need to keep renewing, and plan run-off if you stop trading |
Two of these trip people up most. The first is basis: see aggregate vs each and every claim limits. The second is costs: see defence costs inside vs outside the limit. A £2m costs inclusive aggregate policy is a materially smaller promise than £2m each and every claim with costs in addition.
Many PI clauses are lifted from a template and can be adjusted. Common, reasonable asks include: an aggregate basis for named risks such as fire safety, cladding, asbestos or pollution; costs inclusive cover; a lower limit that reflects the size of the job; "so long as available at commercially reasonable rates" (see commercially reasonable rates explained); and a period of 6 rather than 12 years. Pair this with a liability cap at your PI limit; our guide to liability caps vs PI limits explains why.
Some mismatches are cheaper to fix at policy level, especially if several clients ask for the same thing. Moving from aggregate to each and every claim, extending territorial or jurisdiction limits, or raising the limit for the whole firm may suit a business whose contracts are trending upwards. See what to do when a contract requires a higher PI limit.
An excess layer sits above your primary policy and responds once the primary limit is used. It is commonly written to follow the primary wording; see following form excess layers. For a single large job, project specific PI can ring-fence cover for that project for an agreed period, so it is not shared with the rest of your work. Availability and terms vary by profession and project type.
A surveying firm holds £2m aggregate. A housing association's framework asks for £2m each and every claim. Options include asking the client to accept aggregate cover with a reinstatement, or moving the whole policy to each and every claim at renewal. RICS-regulated firms should also check the RICS PII requirements, which set their own basis and minimum limits.
A software consultant's policy excludes claims brought in US courts. A UK client with American subsidiaries asks for worldwide jurisdiction. The fix may be an extension on the main policy, or negotiating an English law and jurisdiction clause so that claims are brought in England and Wales.
A public sector buyer asks for an insurer with a specified rating. Your broker can confirm the rating of your insurer, and check its status on the FCA Financial Services Register. See what insurer financial strength means.
Ask for a short written comparison showing which requirements your current policy meets, which it does not, and what each fix would involve. Compare excess structures at the same time.
Apex arranges professional indemnity insurance, excess layers and project cover; a broker reads every enquiry.
Your policy does not meet the requirement as written. You can ask the client to accept aggregate cover, perhaps with a reinstatement or with aggregate limited to named risks, or ask your broker about moving to each and every claim. Do not sign without resolving it, because the mismatch could itself be a breach.
Often, yes. An excess layer can add limit above your main policy, and project specific PI can provide dedicated cover for a single project. Availability depends on your profession, the type of work and the insurer, and project policies are more common for larger construction and engineering jobs.
It means legal defence costs are paid on top of the limit, so the full limit remains for damages. Costs inclusive means defence costs come out of the limit. If the contract asks for costs in addition and your policy is costs inclusive, your cover is smaller than the client expects.
It depends on the territorial and jurisdiction limits in your schedule. Many UK policies cover worldwide work but exclude claims brought in courts of the USA or Canada. If a client asks for worldwide jurisdiction, check your schedule and ask your broker about an extension or an English law and jurisdiction clause.
It can be. A PI clause is a contractual promise, so holding less cover than required may be a breach even if no claim is ever made. Some clauses soften this with a commercially reasonable rates qualifier and a duty to notify. Resolve mismatches before signing where you can.
Tell us what your business does, your turnover and any claims. A broker reads every enquiry and comes back with options. No fee for a quote. Or call 0117 325 0027.
Get a PI quote Request a callbackApex Insurance Brokers Limited is authorised and regulated by the Financial Conduct Authority. Registered in England and Wales, company number 07014570. This page is general information, not advice on your individual circumstances, and it does not guarantee that cover will be available or on what terms.
