What is the excess (deductible) in professional indemnity insurance?

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

How the excess actually works

Professional indemnity (PI) insurance protects you against claims that you gave negligent advice or a negligent service, or made an error that caused a client a financial loss. When a valid claim is made, the policy responds — but not from the very first pound. The excess is your share of each claim, and it sits at the bottom of every settlement.

In most UK PI wordings the excess is applied on an each-and-every-claim basis. That means it resets for every separate claim, however many you have in a year. If you suffer three unrelated claims in one policy period and your excess is £1,000, you contribute £1,000 to each — £3,000 in total. A smaller number of policies apply an aggregate excess, where your total contribution across the year is capped. Always check which basis your schedule states, because the difference is significant if you have a bad year.

It is worth being clear about what the excess is not. It is not a cost you pay to make a claim, like a fee. It is simply the first slice of the loss that the policy does not cover. In practice the insurer usually manages and settles the whole claim, then either deducts your excess from the payment or invoices you for it.

How the excess affects your premium

Excess and premium move in opposite directions. Because a higher excess means you absorb more of each loss yourself, the insurer carries less risk on smaller claims — and prices accordingly. As a rough principle:

• A higher excess generally reduces your premium, because you are retaining more of the early risk.
• A lower excess generally increases your premium, because the insurer pays out from a lower threshold.

That does not make a high excess automatically the right choice. The excess is money you must be able to find at short notice, potentially more than once in a year if claims are each-and-every. Setting it higher than your business could comfortably fund is a false economy: the premium saving is small comfort if a real claim lands and you cannot meet your own retention. The sensible level is one that trims the premium without exposing you to a payment you would struggle to make.

Some professions have little choice here. Where a PI requirement is set by a regulator or professional body — for example the minimum terms that apply to solicitors or certain financial advisers — the maximum permitted excess or the way it can be structured may be prescribed. If you operate under scheme rules, confirm what your governing body allows before you agree a figure. If you are not sure, talk it through with a broker before you commit.

Costs-inclusive vs costs-exclusive: why it changes everything

To understand your true exposure you have to read the excess alongside how the policy treats defence costs — the legal and expert costs of investigating and fighting a claim, which can easily rival or exceed the damages themselves. UK PI policies handle this in one of two ways, and the wording matters as much as the numbers.

Costs-inclusive (limit inclusive of costs): Defence costs are paid from within your limit of indemnity. If your limit is £1m and defence costs reach £200,000, only £800,000 remains to settle the claim itself. Your headline limit is effectively eroded by the cost of the fight.

Costs-exclusive (costs in addition): Defence costs are paid on top of your limit of indemnity, so the full limit stays available to meet the claim. This is more protective, and generally more expensive, but it means a hard-fought defence does not eat into the money you need to settle.

The excess interacts with both. Two questions decide how much you actually pay:

• Does the excess apply to damages only, or to costs as well? Some wordings apply the excess purely to the settlement or judgment; others apply it to defence costs too. If yours captures costs, your out-of-pocket contribution can be triggered even by a claim you successfully defend and that never pays a penny in damages.
• Are costs inside or outside the limit? On a costs-inclusive policy, a costs-heavy claim shrinks the cover left for the damages; on a costs-exclusive policy it does not. Either way the excess still comes off the bottom.

The practical takeaway: two policies with an identical limit and an identical excess can leave you in very different positions once real legal costs are involved. Compare the wording, not just the schedule.

A worked example

Say you carry a £1m limit of indemnity and a £2,500 each-and-every-claim excess, and a client alleges your advice cost them £120,000. The insurer investigates, incurs £30,000 in defence costs, and the matter settles at £90,000.

• You pay your £2,500 excess.
• On a costs-inclusive policy, the £90,000 settlement plus £30,000 costs (£120,000) is met from within your £1m limit, leaving £880,000 for any further claims that year.
• On a costs-exclusive policy, the £30,000 costs are paid on top, and the full £1m limit remains intact for the settlement and beyond.

Same excess, same limit — but the cover that survives the claim is materially different. That is why the excess should never be assessed in isolation from the costs basis and the limit.

Duty of fair presentation still applies

The Insurance Act 2015 governs how commercial insurance, including PI, is placed in the UK. It requires you to make a fair presentation of the risk when you take out or renew cover — disclosing every material circumstance you know or ought to know, and any circumstance that might give rise to a future claim. The excess does not change that duty. If you are aware of a possible problem and do not disclose it, the insurer may be entitled to reduce or refuse a claim, and no excess arrangement protects you from that. Notify potential circumstances early, and be complete at renewal.

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

Common questions

Is the excess the same as the deductible?

Yes. In UK professional indemnity insurance the terms are used interchangeably. Both mean the fixed amount you pay towards a claim before the insurer contributes. You will most often see “excess” on a UK schedule and “deductible” on wordings with a US or international flavour, but they describe the same thing.

Do I pay the excess even if the claim is defended and I pay no damages?

It depends on your wording. If your excess applies to defence costs as well as damages, you can be liable for your excess even where the claim is successfully defended and nothing is paid to the claimant. If the excess applies to damages only, a defended claim that settles for nothing may not trigger it. Check whether your excess captures costs.

Should I choose a higher excess to save on premium?

Only up to the amount your business could readily pay, potentially more than once in a year if the excess is each-and-every-claim. A higher excess usually lowers the premium, but it transfers more risk back to you. The saving is worthwhile only if meeting the excess would not strain your cash flow when a claim actually arrives. A broker can model the trade-off against your turnover and risk profile.

If you would like your own excess, limit and costs basis reviewed together, start a PI quote with Apex and we will walk you through the options.

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.