Written by Michael Foote, Insurance Expert
Michael Foote is the founder of Quote Goat and has over 20 years experience working in finance & insurance. Since launching Quote Goat he has appeared on TV as well as many of the largest online publications including Forbes, The Telegraph and The Metro. Prior to Quote Goat, he worked in finance in the city.
What Is PI Policy Wording?
A professional indemnity policy (PI policy) is the legal contract between you and your insurer. The policy wording defines what’s covered, what’s excluded, and how claims are handled. Unlike the marketing summary or quote document, the full policy wording is what matters when you make a claim.
Most professionals don’t read the full wording until there’s a problem. By then, it’s too late to fix gaps in cover. Understanding the key sections before you buy helps you choose a policy that actually protects your business.
The Policy Schedule
The schedule is the one-page summary that appears at the front of your policy. It sets out:
- Your business name and trading activities
- Limit of indemnity (per claim and aggregate)
- Excess amount
- Retroactive date
- Policy period
- Any endorsements or special terms
Check that your activities are described accurately. If the schedule says “architectural services” but you also provide CDM coordination or party wall work, those areas may not be covered unless specifically listed.
The Insuring Clause
This is the section where the insurer agrees to indemnify you. A standard PI policy covers:
- Civil liability arising from your professional services
- Defence costs and legal representation
- Compensation payable due to negligence, errors or omissions
The wording should cover both proven negligence and allegations. Many claims begin with an accusation that doesn’t lead to a settlement, but you still need legal representation. Make sure defence costs are included even if the claim is groundless.
Common Exclusions in PI Policies
Every professional indemnity policy includes exclusions. Some are standard across all insurers, while others depend on your profession or the insurer’s appetite.
Standard exclusions typically include:
- Dishonesty, fraud or deliberate breach
- Fines, penalties or punitive damages
- Bodily injury or property damage (covered under public liability)
- Contractual liability that goes beyond your duty of care
- Known circumstances or prior claims
- Work outside your usual scope
Profession-specific exclusions for architects and engineers often cover:
- Basement works and underpinning
- Cladding design
- Asbestos surveys
- High-rise residential buildings over a certain height
If your work involves any of these areas, you may need an endorsement to reinstate cover. For example, if you design extensions involving underpinning, check whether basement works need to be included in your PI policy.
Claims-Made vs Occurrence Basis
Most professional indemnity insurance operates on a claims-made basis. This means the policy only responds to claims made and notified during the policy period, not when the work was carried out.
Key points to understand:
- You need continuous cover to remain protected
- The retroactive date determines how far back in time your cover applies
- Switching insurers without checking your retroactive date can leave gaps
- If you stop trading, you may need run-off cover to protect against future claims
For more detail on how this affects older projects, read our article on when professional indemnity insurance covers past work.
The Retroactive Date
Your retroactive date is the earliest date from which a claim can arise and still be covered. This is one of the most important but often overlooked details.
For example, if your retroactive date is 1 January 2020, any claim relating to work done before that date will not be covered, even if the claim is made during your current policy period.
When switching insurers, make sure your new policy maintains the same retroactive date. If it moves forward, you lose cover for earlier work. Always ask your broker to confirm this in writing.
Defence Costs and the Limit of Indemnity
Check whether defence costs sit inside or outside your limit of indemnity. This distinction matters.
If defence costs sit inside the limit, a costly legal dispute could erode the amount available to settle the claim itself. Most PI policies include defence costs within the limit, so if you have £1 million cover and spend £300,000 on legal fees, only £700,000 remains for the claimant.
Some insurers offer defence costs in addition to the limit, which provides better protection.
Endorsements and Extensions
Endorsements modify the standard wording. They can either restrict cover (exclusions) or extend it (for additional activities or risk types).
Common extensions include:
- Cover for loss of documents
- Libel and slander
- Breach of confidentiality
- Intellectual property infringement
- Mitigation costs
Make sure any special terms are clearly stated in writing and attached to your policy schedule. Verbal assurances don’t count if they’re not documented.
Claims Notification Requirements
Your policy will set out how and when you must notify a claim or circumstance. Failing to notify promptly can void your cover.
Typically, you must notify:
- Any claim made against you
- Any circumstance that could reasonably give rise to a claim
- Any legal proceedings or formal complaints
If a client emails to say they’re unhappy with your work and considering legal action, notify your insurer immediately. It’s better to report early than risk a coverage dispute later.
Subcontractor and Third-Party Cover
If you use subcontractors or consultants, check whether your policy covers liability arising from their errors. Some policies exclude work performed by others unless they hold their own PI cover.
This is particularly important for project managers, principal designers, and lead consultants. You can read more on whether PI insurance covers subcontractor mistakes.
Final Checks Before You Buy
Before committing to any professional indemnity quote:
- Read the full policy wording, not just the summary
- Confirm your activities and project types are covered
- Check the retroactive date matches your previous policy
- Ask your broker to explain any clauses or exclusions you don’t understand
- Request written confirmation of any verbal assurances
- Compare the excess levels and any sub-limits
Professional indemnity insurance is there to protect you when things go wrong. Taking the time to understand what you’re buying ensures the policy actually responds when you need it most.
Ready to compare professional indemnity quotes tailored to your business? Use the button on screen to get started.
