Professional indemnity insurance protects Australian tradespeople and professionals when a client claims they suffered a financial loss because of your advice, design, inspection, report, or service. If you make an error, miss a detail, or give advice that later proves incorrect, this cover helps pay for legal defence costs, investigations, settlements, and compensation.
In simple terms, if your words, plans, or professional judgement cause a client to lose money, professional indemnity insurance is the policy that responds.
This guide explains what professional indemnity insurance is, who needs it, state-by-state rules, costs, how cover is calculated, how long it lasts, and how it differs from public liability insurance, from an Australian perspective.
What Is Professional Indemnity Insurance?
Professional indemnity insurance, often called PI, covers claims arising from:
- Negligence
- Errors and Omissions
- Breach of professional duty
- Incorrect advice or recommendations
- Design or specification faults
It applies when a client claims your professional service caused them financial loss, even if no physical damage or injury occurred.
What Does Professional Indemnity Insurance Typically Cover?
Most Australian professional indemnity policies include:
- Legal defence costs
- Court fees and investigations
- Settlements or compensation payouts
- Claims of misleading or deceptive conduct
- Defamation (where covered by the policy)
- Loss caused by incorrect advice, plans, or reports
Optional extras may include:
- Retroactive cover, protecting past work done before the policy started
- Run-off cover, protecting you after you stop trading
This type of cover is commonly arranged through specialist brokers such as Contractor Cover, who focus on trades and contractor risks rather than generic business insurance.
What Professional Indemnity Insurance Does Not Cover
Common exclusions include:
- Asbestos-related claims
- Intentional or dishonest acts
- Illegal activities
- Fines and penalties
- Known issues not disclosed to the insurer
Always read your policy wording carefully.
Who Needs Professional Indemnity Insurance?
You generally need professional indemnity insurance if you:
- Provide advice or recommendations
- Prepare plans, drawings, or designs
- Conduct inspections, certifications, or reports
- Manage projects or coordinate works
- Give technical or professional opinions
Trades and Professions That Commonly Need This Cover
In Australia, professional indemnity insurance is common for:
- Electricians who design systems or provide compliance advice
- Plumbers offering design guidance or inspections
- Builders and construction managers
- Project managers and site supervisors
- Certifiers and inspectors
- Draftspeople, designers, and architects
- Arborists providing risk assessments
- Landscapers designing drainage or structures
- Engineers and consultants
- Many, many more
Even if you mainly perform physical work, the moment you give advice or sign off on plans, you expose yourself to financial risk.
When Professional Indemnity Insurance Is Required
Professional indemnity insurance may be required by:
- State or local licensing bodies
- Industry regulators
- Principal contractors
- Government tenders
- Commercial clients
- Professional associations
In many cases, clients will ask for a certificate of currency before work starts, especially for higher-risk or advisory roles.
State-by-State Professional Indemnity Requirements
Professional indemnity rules vary by state, occupation, and regulator. Below is a general guide only.
| State / Territory | Requirements |
|---|---|
| New South Wales | Mandatory for some licensed professionals such as certifiers and engineers. Often required under construction and consultancy contracts. |
| Victoria | Required for registered building practitioners, surveyors, and some consultants. Minimum cover limits are often set by the regulator. |
| Queensland | Common requirement for certifiers, engineers, and advisory roles. Frequently requested for government and council work. |
| Western Australia | Required for building surveyors, engineers, and some design professionals. Not always mandatory for trades, but often required by contracts. |
| South Australia | Required for certain regulated professions. Common in construction management and consulting roles. |
| Tasmania | Required for registered professionals in advisory roles. Often specified in commercial contracts. |
| Australian Capital Territory | Required for licensed professionals and consultants. Often a condition of registration. |
| Northern Territory | Fewer formal mandates, but widely required by clients and principal contractors. |
Always check your licence or registration requirements and your contracts. These are usually set by your regulator or registration body and often depend on your role and occupation, not just the state you work in.
How Much Does Professional Indemnity Insurance Cost?
Professional indemnity insurance costs vary widely. In Australia, small contractors and sole traders often pay:
- $300 to $800 per year for basic cover
- $800 to $2,000+ per year for higher-risk roles or higher limits
These are indicative ranges only.
Typical Cover Levels
Most insurers offer tiers such as:
- Basic cover: $500,000 limit
- Standard cover: $2 million limit
- Comprehensive cover: $5 million or more
Higher limits cost more, but are often required for commercial contracts.
How Professional Indemnity Insurance Is Calculated
Insurers assess several factors when pricing your policy:
- Your occupation and services provided
- Annual turnover
- Level of advice or design involved
- Claims history
- Chosen cover limit
- Excess amount
- Retroactive date
Simple Example
A landscaper who only installs turf may pay very little. The same landscaper who designs drainage systems and provides written plans will pay more, because the financial risk is higher.
How Long Does Professional Indemnity Insurance Last?
Professional indemnity insurance usually runs for 12 months, like most business policies.
However, claims can be made years after the work was done. This is why two features matter.
Claims-Made Basis
Professional indemnity policies in Australia operate on a claims-made basis, meaning:
- The policy must be active when the claim is made, not when the work was done
Retroactive Cover
Retroactive cover protects work done before your current policy started, as long as the retroactive date allows it.
Run-Off Cover
Run-off cover protects you after you stop trading, retire, or sell your business. This is important because clients can still make claims years later.
Difference Between Professional Indemnity and Public Liability Insurance
Put simply, professional indemnity protects you when a client claims your advice or service caused financial loss, while public liability protects you when your work causes injury or property damage.
| Professional Indemnity Insurance | Public Liability Insurance |
|---|---|
| Covers financial loss | Covers physical injury or property damage |
| Relates to advice, design, or professional services | Relates to accidents or incidents |
| Triggered by errors, omissions, or negligence | Triggered by bodily injury or damage to property |
| Common claims involve money, not physical damage | Common claims involve slips, damage, or breakages |
Why Many Trades Need Both
Many Australian trades need both policies because they face both risks.
Example:
- An electrician damages a client’s wall. Public liability responds.
- The same electrician gives incorrect compliance advice that causes financial loss. Professional indemnity responds.
Common Professional Indemnity Claim Examples
Incorrect Product Recommendation
A contractor recommends a product that is not suitable. The client follows the advice and suffers financial loss when it fails.
Faulty Plans or Drawings
Incorrect plans cause underground services to be hit. No one is injured, but repair costs and delays create financial loss.
Incorrect Technical Advice
Advice on concrete curing or load capacity leads to failure. The client claims lost revenue and rectification costs.
Bundling Professional Indemnity With Other Covers
Many contractors bundle professional indemnity with:
- Public liability insurance
- General property cover
- Personal accident and illness insurance
- Tax audit insurance
Bundling can simplify administration and reduce total cost when arranged through a specialist broker.
FAQs
Is professional indemnity insurance mandatory in Australia?
Not always by law, but often required by licences, contracts, or clients.
Do sole traders need professional indemnity insurance?
Yes, if they provide advice, designs, inspections, or professional services.
Does professional indemnity cover subcontractors?
Usually yes, if they are named or included under the policy terms.
Can I get professional indemnity insurance quickly?
Yes. Many providers offer online quotes and fast documentation for contractors.
How much cover do I need?
This depends on your contracts, industry, and risk exposure. Many commercial jobs require at least $2 million.
Key Takeaways
Professional indemnity insurance protects your reputation, finances, and future work when advice or professional judgement is questioned. For many Australian trades and contractors, it is not optional. It is a practical safeguard against costly disputes.
If you provide advice, plans, inspections, or professional services of any kind, professional indemnity insurance is one of the most important covers your business can hold.
To compare multiple quotes and get quick coverage, simply navigate to our professional indemnity insurance and fill in our online quote form.
