What does professional indemnity insurance cover — and not cover?

Reviewed by Matthew Bartlett, Director, Apex Insurance Brokers Limited · Last reviewed 2026-08-05

Professional indemnity insurance — sometimes called professional liability or errors and omissions (E&O) cover — protects people and firms who give advice, provide a professional service, or handle client data or money. If a client alleges your work fell short and cost them money, PI responds to the claim. This guide sets out clearly what a standard UK PI policy covers, what it commonly leaves out, and why the exclusions exist.

What PI insurance covers

PI is a “civil liability” product. Most UK wordings are triggered by a claim made against you during the policy period, rather than when the work was done — which is why keeping cover in place after a project ends matters. The core things a policy is designed to pay for are:

• Professional negligence. A failure to exercise reasonable skill and care in your work — the most common reason a PI claim is brought.
• Errors, mistakes and omissions. Getting a figure wrong, missing a deadline, drafting something incorrectly, or leaving out advice you should have given.
• Defence and legal costs. The cost of investigating and defending an allegation — often the largest and earliest part of a claim, and payable even where you are ultimately found not liable.
• Damages, settlements and awards. Compensation you are legally liable to pay a client, or a negotiated settlement agreed with insurers.
• Civil claims from a client’s financial loss. The loss usually needs to be financial and to flow from your professional service.

Depending on the wording and any extensions you buy, a policy may also respond to allegations of breach of professional duty, breach of confidentiality, defamation, loss of documents or data, and unintentional infringement of intellectual property. These are common add-ons but are not universal — always check whether they are included or optional.

What PI insurance typically does not cover

Exclusions exist to keep PI focused on genuine professional error, not deliberate wrongdoing or risks that belong under a different policy. The most common exclusions in UK wordings are:

• Fraud, dishonesty and criminal acts. Deliberate, dishonest or criminal conduct by the insured is excluded. Note that many policies still protect innocent partners or the firm from the dishonesty of one individual, so read how the clause is drafted.
• Known circumstances and prior claims. Anything you were already aware of — a dispute, a complaint, or a circumstance likely to give rise to a claim — before the policy started. This is why proposal forms ask you to disclose known issues.
• Guarantees, warranties and performance promises. If you contractually guaranteed a specific outcome or result, a liability arising purely from that promise is usually excluded. PI covers falling below a reasonable standard, not failing to hit a guarantee you volunteered.
• Assumed or contractual liability beyond common law. Liabilities you take on by contract that go further than you would owe anyway (for example, wide indemnity or hold-harmless clauses) are often excluded or restricted.
• Bodily injury and property damage. Injury to people or physical damage to property is the territory of public liability and employers’ liability insurance, not PI.
• Fines and penalties. Regulatory fines and penalties are commonly excluded, and in any event some are uninsurable as a matter of public policy.
• Trading and insolvency losses. Your own bad debts, business losses, or the cost of redoing work at your own expense are not third-party claims and fall outside PI.

Every insurer’s wording differs. Some exclusions can be narrowed, bought back, or removed for a particular trade, so the exact policy wording matters more than the label on the product.

Covered vs excluded — at a glance

Limits, excess and the “claims made” trigger

PI is bought to a limit of indemnity — the most the insurer will pay. Common options are offered generically as, for example, £1m, £2m or £5m, and the right figure depends on your contracts, your clients’ requirements and the size of loss a mistake could realistically cause. Some professions have a minimum limit set by their regulator or professional body, so check your own requirements before choosing.

Two features are worth understanding clearly. First, whether defence costs sit inside the limit (reducing what is left for damages) or are paid in addition to it. Second, the excess — the first part of each claim you pay yourself. Because most UK PI is written on a claims-made basis, cover has to be in force when the claim is made, not when the work was done. If you stop trading, run-off cover keeps you protected against claims that surface later.

Why disclosure matters so much

The single most common way a valid-looking claim gets declined is non-disclosure. Under the Insurance Act 2015, commercial policyholders have a duty to make a “fair presentation of the risk” — telling the insurer what they know, or ought to know, in a reasonably clear way. Get this wrong and the insurer may have remedies that reduce or avoid the claim. In practice that means declaring known circumstances, past claims and the true nature of your work honestly on the proposal. A broker’s job is partly to help you present that risk fully so cover actually responds when you need it.

If you want your specific work checked against the right wording, start a PI quote with Apex and we will talk it through.

Common questions

Does PI cover me if the mistake was genuinely my fault?
Yes — that is precisely what it is for. PI responds to negligence, errors and omissions in your professional work. The exclusions are aimed at deliberate dishonesty and risks that belong elsewhere, not honest mistakes.

Are legal defence costs covered even if I win?
Generally yes. PI is designed to fund the defence of a covered allegation regardless of the outcome, which is often the point of buying it. Check whether costs are payable in addition to your limit or come out of it, as that affects how much is left for any settlement.

What if a client alleges fraud against me?
An allegation of dishonesty is not the same as proven dishonesty. Many wordings will still fund your defence unless and until dishonesty is actually established, and often protect innocent partners regardless. The precise wording governs the outcome, so read the fraud and dishonesty clause carefully.

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.