How to choose the right professional indemnity cover for your consultancy or agency

Choosing the right professional indemnity cover can feel like navigating a maze. Je am here to make things clearer and practical. In this article I break down the core choices you face as a consultant or agency: negligence claims, retroactive date, run-off cover, client contracts and how to match limits, excesses and policy wording to your real risk. I use examples and actionable tips so vous can decide with confidence.

Understanding professional indemnity for consultancies and agencies

What professional indemnity actually protects

Professional indemnity (PI) protects you against claims alleging professional negligence, breach of duty, or negligent advice that caused a client loss. For a creative agency, that might be a failed campaign that caused financial loss. For a consultant, it could be flawed strategy or faulty specifications. PI typically covers legal defence costs plus damages awarded.

Typical claim triggers and financial impact

Claims often arise from missed deadlines, incorrect advice, scope creep, or data handling errors. Even if you are not found liable, legal fees can escalate. Example: a mid-sized consultancy faces a £75,000 defence bill for a disputed tender process — the claim never reached damages, but costs were real. That’s where PI proves its value.

Assessing negligence risk and required limits

How to evaluate your exposure

Start by listing the services you deliver, client sectors and contract values. High-value or regulated clients raise exposure. Also consider the likelihood of future claims — repeated complex projects create cumulative risk. Je recommend scoring projects by financial impact and reputational sensitivity.

Choosing appropriate limits and excesses

Limits should reflect the largest project you handle and contractual obligations. If the typical client contract demands £1m cover, having only £250k is a mismatch. Higher limits reduce personal and business risk. Excess choices affect premiums: higher excess lowers premium but increases out-of-pocket cost on any claim. Balance prudence with cashflow.

Retroactive date and prior acts cover explained

Why the retroactive date changes everything

The retroactive date determines how far back your policy will cover incidents that happened before the policy start but are claimed later. If you switch insurers and your new policy has a later retroactive date, a claim arising from past work might be excluded. That gap has consequences.

Practical example and what to request

Imagine vous worked on a compliance project in 2019 and a claim is made in 2025. If your current policy’s retroactive date is 2020, that claim may be denied. Je advise always ensuring a retroactive date that covers the start of your practice or buying prior acts cover when changing policies. When obtaining quotes, explicitly ask insurers to confirm the retroactive date in writing.

Run-off cover when you cease trading or restructure

What run-off (claims-made) cover does for former partners and sold businesses

Run-off cover extends protection for claims made after you stop trading or after a business sale. For consultants who plan to retire or agencies that are being sold, run-off preserves cover for past acts. Without it, you can be exposed to late claims with no protection.

Cost drivers and timing considerations

Run-off premiums depend on your claim history, revenue, and how long you need protection. Typical durations range from 6 to 12 years for high-risk sectors, sometimes lifetime for regulated professions. Example: a design agency sold to a larger firm negotiated a 5-year run-off for partners — cheaper than unlimited retrospective liability.

Client contracts: clauses that affect your cover

Common contractual demands and red flags

Clients may require indemnities, specific limits, or a waiver of subrogation. They may demand you name them as an insured party. Such clauses can increase your exposure or conflict with policy terms. A red flag: a clause requiring unlimited liability or impossible performance warranties.

How to negotiate terms and align with your policy

Review contracts before signature. Je suggest seeking clauses that cap your liability to a proportionate amount and avoid passing through third-party liabilities you cannot control. Ask the insurer if proposed contract wording invalidates cover. If a client insists on higher limits, discuss purchasing an endorsement or increasing your limit for that project only.

Picking an insurer and reading policy wording

Beyond price: what to compare

Compare policy scope, definitions of negligence, criminal acts exclusions, intellectual property cover, cyber and data breach extensions, and how claims are handled. Two policies with similar premiums can offer very different protection.

Practical shopping tips

• Request full policy wordings and run them past a broker or lawyer.

• Check claims handling reputation and response times.

• Ask about sub-limits (e.g., defence costs within the limit) and whether defence costs erode the limit.

• Get the retroactive date confirmed in writing.

• Ensure run-off cover options are available if you plan to stop trading.

• Align policy limits with client contract requirements and negotiate where necessary.

• Prefer insurers who cover your primary exposures (IP, data, advice errors).

• Use an experienced broker for complex or high-value contracts.

Final actionable checklist to secure the right professional indemnity

Je summarize the practical steps vous should take: obtain tailored quotes, verify retroactive dates, secure run-off if needed, reconcile policy limits with client contract clauses, and review policy wordings carefully. Make decisions based on exposure, client demands, and your appetite for retained risk.

My last piece of advice: treat PI as part of your commercial strategy rather than a box-ticking exercise. With the right cover, vous protect cashflow, reputation and the long-term value of your consultancy or agency.

For a hands-on comparison of UK professional indemnity policy wordings, retroactive date treatments and run-off options from brokers, see westofscotlandinsurance.co.uk; reviewing examples like these helps you spot differences in sub-limits, defence-cost handling and contractual endorsements.