Professional indemnity vs directors' & officers' insurance: what's the difference?

Reviewed by Apex Insurance Brokers · Last reviewed 2026-08-05

They sound similar, and brokers are often asked whether one replaces the other. They don't. PI and D&O respond to genuinely different exposures, from different claimants, over different types of alleged wrongdoing. Most professional firms with a formal board or LLP structure end up needing both, because a single incident can trigger a client claim and a management claim at the same time.

What professional indemnity insurance actually covers

PI (sometimes called professional liability) responds when a client, or another third party who relied on your work, alleges that your professional services fell short and caused them financial harm. The trigger is a mistake in the work itself: negligent advice, an error, an omission, a missed deadline, a flawed design, a breach of professional duty of care.

Typical PI claims include a surveyor who under-values a property, an accountant whose advice leads to a tax liability, a consultant whose report contains an error the client acted on, or a designer whose work infringes a third party's rights. Cover generally extends to your defence costs, damages or settlements, and often to related matters such as breach of confidentiality, defamation arising from your work, and loss of client documents.

For many UK professions, PI is not optional. It is a condition of authorisation or membership. Solicitors must hold PI meeting the SRA's minimum terms and conditions; RICS-regulated surveyors, ICAEW and ACCA accountants, and ARB-registered architects all operate under mandatory PI requirements; and firms authorised by the Financial Conduct Authority must hold PI (or equivalent capital) to meet the FCA's prudential rules. Even where it isn't compulsory, most commercial clients now require it in their contracts.

Crucially, PI protects the entity — the limited company, LLP or partnership delivering the service. It is written on a claims-made basis, meaning the policy in force when a claim is made against you responds, not the policy from when you did the work.

What directors' & officers' insurance actually covers

D&O responds when an individual director, officer or senior manager is pursued personally for an alleged wrongful act committed in that management role. Under the Companies Act 2006, directors owe a range of statutory duties to the company, and they can be held personally liable if those duties are breached. D&O exists to protect their personal assets when that happens.

The claimants here are rarely your clients. They tend to be shareholders, investors, creditors, employees, regulators, a liquidator or administrator after an insolvency, or even the company itself. The allegations concern how the business was run rather than the quality of a professional service delivered to a customer.

Common D&O scenarios include:

• A regulator (for example the FCA, HSE or HMRC) investigating a director's conduct, with the associated legal costs.
• An employment-related management claim — wrongful dismissal or discrimination alleged against directors personally.
• A shareholder or investor alleging mismanagement or misrepresentation.
• A liquidator pursuing directors for wrongful or fraudulent trading after an insolvency.
• A health and safety prosecution naming an individual under the relevant legislation.

D&O policies are usually structured around three insuring agreements: cover for the individual where the company cannot indemnify them (often called Side A), reimbursement to the company when it has indemnified a director (Side B), and, in some wordings, cover for the company itself in specific circumstances such as securities claims (Side C).

PI vs D&O side by side

Where they overlap — and why the distinction matters

A single event can produce both a PI and a D&O claim. Imagine a consultancy delivers flawed advice that costs a client money. The client sues the firm for professional negligence — that is a PI claim. If a shareholder or investor in the consultancy then alleges the directors mismanaged the business, allowed poor risk controls, or misrepresented the firm's position, that is a separate D&O claim against the individuals. One incident, two exposures, two policies.

This is exactly why treating them as interchangeable is risky. A firm that holds only PI leaves its directors personally exposed to regulatory investigations, insolvency claims and management disputes. A firm that holds only D&O has no protection when a client alleges the service was negligent. The two policies are complementary, not substitutes.

If you're not sure which exposures your structure creates, start a PI enquiry with Apex and we'll walk through what applies to your firm.

Choosing limits and getting the presentation right

Limits of indemnity for both covers are typically offered in tiers — commonly £1m, £2m or £5m, with higher layers available for larger firms or where a client contract demands it. The right level depends on the size of contracts you handle, your regulator's minimum (for PI), the value at risk in a worst-case claim and, for D&O, the scale of your balance sheet and any external investment.

Whichever you buy, the duty of fair presentation under the Insurance Act 2015 applies. You must disclose material facts fairly and accurately when you take out or renew the policy. Getting a broker to help you present the risk properly reduces the chance of a coverage dispute later — and, in practice, secures better terms.

Common questions

Does D&O cover the company itself?
Primarily it protects individuals, but some wordings include cover for the company in specific situations — most notably securities claims (often called Side C). The core purpose remains protecting directors and officers personally, so read your wording to see exactly what the entity cover extends to.

If my firm is a limited company, do I still need PI as well as D&O?
Almost certainly, yes. Incorporation protects your directors from ordinary business debts, but it doesn't answer a client's claim that your professional work was negligent — that's PI's job. And for many regulated professions PI is a condition of authorisation, regardless of company structure.

Are sole traders and partnerships affected?
PI applies to any structure that delivers professional services, including sole traders and partnerships. D&O in its classic form is aimed at companies with directors and officers; partnerships and LLPs are usually covered through management liability arrangements tailored to their governance, so it's worth checking the exact wording for your structure.

Larger or more complex risk? Speak directly to a director — call 0117 325 0027 or email info@apexinsurancebrokers.co.uk.

PI and D&O answer different questions. PI asks: was the work we delivered to our client sound? D&O asks: are the people running this company protected when their decisions are challenged? For most professional firms with a board or partnership, the honest answer is that you need both working together — so that whether a claim comes from a client or from a regulator, shareholder or liquidator, someone is covered.

Want the shortest route to the right cover? Tell us about your firm and we'll take it from there.

Apex Insurance Brokers Limited is authorised and regulated by the Financial Conduct Authority (FRN 724952). This guide is general information, not advice on a specific policy or a substitute for reading your policy wording.