What happens if you don't have professional indemnity insurance?

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

Professional indemnity (PI) insurance exists to absorb the cost of a claim that you cause — a mistake, a piece of negligent advice, a missed deadline, a breach of confidentiality. Take the insurance away and the mechanism that pays those costs simply isn't there. The obligation doesn't disappear; it just lands on you personally or on your business.

This page walks through what actually happens, step by step, when an uninsured professional faces a claim — and why the consequences reach well beyond the disputed invoice.

You pay the defence costs, win or lose

The first myth to drop is that costs only bite if you're found liable. They don't. The moment a formal claim or a letter of claim arrives, you need advice — and defending a professional negligence allegation is expensive whether or not the claim has merit.

With a policy, your insurer appoints and pays for solicitors, and often specialist experts to rebut the technical allegations. Uninsured, you're instructing and paying those people out of your own pocket from day one. Even a claim you successfully defend can leave you tens of thousands of pounds down, because the English courts only ever award part of your legal spend back — and only if the other side can actually pay.

You pay the damages and the settlement

If the claim succeeds, or if it's cheaper to settle than fight, that money comes from you. Consider an illustrative example: an architectural practice specifies a detail that later fails, and remedial building works cost the client £180,000. Insured, the policy responds subject to its limit and excess. Uninsured, the practice must find £180,000 — from business reserves, from the directors, or not at all.

For a sole trader or partnership, there is often no corporate shield: personal assets, including savings and in the worst cases the family home, can be exposed. Even a limited company can be forced into insolvency by a single claim it cannot fund.

Insured vs uninsured: who pays what

You may be breaking your regulator's rules

For many professions, PI isn't optional — it's a condition of being allowed to practise. Solicitors regulated by the SRA, accountants under bodies such as the ICAEW and ACCA, chartered surveyors under RICS, architects, and financial advisers authorised by the FCA are all subject to minimum PI requirements set by their regulator or professional body.

Trading without the required cover can mean disciplinary action, conditions on your practising certificate, or being stopped from working altogether — entirely separate from the claim itself. In other words, an uninsured professional can lose their livelihood not only through the cost of one dispute, but through the regulatory breach of having no cover in place.

You can lose contracts and clients

Even where no regulator demands it, clients often do. Many commercial contracts, public-sector frameworks and larger private clients require you to hold PI at a stated level — commonly £1m, £2m or £5m depending on the work — and to evidence it before you're engaged. No policy means no contract. For a consultancy that relies on tender work, going uninsured can quietly close the door on its best opportunities.

The claims-made trap: you can't buy cover after the event

PI is almost always written on a claims-made basis. That means the policy that responds is the one in force when the claim is made against you, not when you did the work. You cannot wait for a problem to surface and then buy a policy to cover it — insurers won't cover a claim, or circumstances that could give rise to one, that you already know about.

This is why a gap in cover is so dangerous. If you let PI lapse, then a client complains about work you did last year, there is no policy to fall back on. It also means that stopping work doesn't end your exposure: claims can arrive months or years later, which is why retiring professionals often buy run-off cover to protect that tail. Speak to us about continuous cover before any gap opens up.

The knock-on damage

• Cash flow shock — defence costs and settlements often have to be paid while the business still needs to run.
• Director and personal exposure — sole traders and partners have no company to hide behind; a claim can reach personal assets.
• Reputation — handling a dispute without professional support tends to be slower, more public and more damaging to client relationships.
• Distraction — months spent managing a legal claim is time not spent earning.

Common questions

Is professional indemnity insurance a legal requirement?

There's no single UK law making PI compulsory for everyone. But for many regulated professions it's mandatory under the rules of bodies like the SRA, RICS, ICAEW or the FCA, and it's frequently required by client contracts. Whether it's "required" depends on your profession and who you work for.

Can I just close the company to avoid an uninsured claim?

Not reliably. Claims can survive against directors or partners personally, and deliberately dissolving a company to dodge a known liability can be challenged. Closing down also doesn't remove past exposure — which is exactly what run-off PI cover is designed to address.

What limit of indemnity do I need?

It depends on the value of the work you do, the losses a mistake could cause, and any minimum set by your regulator or clients. Common options are £1m, £2m or £5m. A broker can help you match the limit to your real exposure rather than guessing.

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 your policy wording.