Professional Indemnity Insurance: What Does It Cover?

Professional indemnity insurance helps cover legal-action costs arising from claims against professional advice or services, as well as client losses caused by mistakes, neglect or contract breaches. It is mandatory for some professions, and a professional association may offer industry-specific indemnity insurance at a much lower cost, according to business.gov.au, figures checked 1 October 2026.

What does professional indemnity insurance cover?

Keep the main parts of a claim separate:

Examples of client losses described by business.gov.au include:

• Failing to achieve the results promised in a contract
• Giving incorrect financial or legal advice
• Auditing a company’s accounts incorrectly
• Medical malpractice while performing a surgical procedure

These examples are not a promise that every policy covers every situation. The policy’s Product Disclosure Statement (PDS) sets the detailed scope of cover.

What examples should I check in the policy?

Compare the examples in the PDS with the work your business actually performs. A policy might describe cover in terms of professional services, errors, neglect, contract breaches or client losses, so the wording matters.

For example, a consultant, financial adviser, auditor or healthcare provider faces different professional duties. The examples used by one insurer may not reflect the services, contracts or risks of another profession.

Check whether the PDS explains:

• Which professional services and advice are included
• What legal-action costs the insurer will contribute towards
• What constitutes a client loss
• Whether mistakes, neglect and contract breaches are covered separately
• Which exclusions, conditions and limits apply
• Whether a relevant regulator or professional body imposes minimum requirements

Do not rely on a policy name or a short sales description alone.

Is professional indemnity insurance different from public liability?

The policies may respond to different parts of a loss.

Public liability may also cover matters such as emotional distress, a recognised psychiatric illness or consequential loss where negligence causes another business to lose expected revenue. Businesses that make, sell or supply goods, including through repair or service, may need product liability cover.

If an incident involves professional advice as well as injury or property damage, ask how the policies interact rather than assuming one policy replaces another.

Is professional indemnity insurance compulsory for my profession?

Professional indemnity insurance is mandatory for some professions. A business may also need insurance because the people it deals with require it, while some other insurance remains the business’s choice.

Legal requirements depend on the type of business and the rules applying to the profession and location. Do not assume that cover is optional—or compulsory—based only on a general comparison.

Check the current page published by the relevant regulator or professional body, then compare those requirements with the policy wording. This is particularly important if membership, registration or a client requires a particular level of cover.

Could a professional association offer cheaper cover?

A professional association may offer industry-specific indemnity insurance at a much lower cost. That is a possible option to investigate, not a guaranteed quote or an assurance that the policy will suit every business.

Compare the full terms rather than cost alone. The relevant questions include whether the policy covers your professional services, how it treats client losses and legal-action costs, and whether it meets any requirements from your regulator or professional body.

What should I check before choosing a policy?

Start with the PDS and prepare a short description of:

• The professional services you provide
• The type of clients you work with
• The contracts you commonly enter into
• The kinds of errors or omissions clients may claim against you
• Any mandatory requirements for your profession

Then discuss the options with a licensed insurance broker, authorised insurer or business adviser. Business.gov.au also notes that authorised general insurers can be found on the Australian Prudential Regulation Authority’s register, while an insurance broker’s licence can be checked on the Australian Securities and Investments Commission’s professional register.

This is general information, not financial or legal advice. Confirm your obligations with the relevant regulator and read the policy PDS before deciding.

Sources

• Types of business insurance | business.gov.au

FAQ

Does professional indemnity insurance cover legal costs and client losses?

Business.gov.au distinguishes legal-action costs arising from claims against professional advice or services from client losses caused by mistakes, neglect or contract breaches. The policy PDS determines how those parts of cover apply to your business.

Is professional indemnity insurance mandatory for every business?

No. It is mandatory for some professions, while some businesses may need insurance because the people they deal with require it. Check the current requirements for your profession and location.

Is professional indemnity insurance the same as public liability?

No. Professional indemnity is associated with claims involving professional advice or services and resulting client losses. Public liability is associated with negligence causing death, injury or property damage to another person.

Should I choose an association policy because it may cost less?

An association may offer industry-specific indemnity insurance at a much lower cost, but the saving alone does not establish suitability. Compare the PDS, exclusions, limits and professional requirements before choosing.