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 Happens If You Don’t Have Professional Indemnity Insurance?
Operating without professional indemnity (PI) insurance exposes you to serious financial and legal risk. If a client claims you made a mistake, provided poor advice, or breached your duty of care, you’ll need to defend yourself and potentially pay damages from your own pocket.
Whether you’re an engineer, accountant, architect or consultant, working without cover means you’re personally responsible for every aspect of a claim, from legal fees to compensation.
Personal Liability and Financial Risk
If you operate as a sole trader or in a partnership, you don’t have the protection of limited liability. Your personal assets, including your home, savings and investments, could be seized to pay for damages or legal costs if a client successfully sues you.
Even if you’re a limited company, the company itself remains liable. A single claim could bankrupt the business. Directors can also face personal liability in certain situations, particularly where they’ve signed personal guarantees or acted negligently.
Legal Defence Costs Add Up Quickly
Many people assume they’ll only pay if they lose a claim. That’s not how it works. Legal defence costs can easily run into tens of thousands of pounds, even for claims that are eventually dismissed or settled in your favour.
Without PI insurance, you’ll need to pay for:
- Solicitors and barristers
- Expert witnesses
- Court fees
- Administrative costs
- Your own time away from work
A straightforward professional negligence claim can cost £20,000 to £50,000 to defend, regardless of the outcome.
Loss of Contracts and Clients
Many clients won’t work with you without proof of PI insurance. This is especially common in industries like engineering, accountancy, architecture and surveying.
If you’re bidding for work and can’t provide a valid certificate of insurance, you’ll likely be excluded from the tender process. Even existing clients may terminate contracts if they discover you’re uninsured.
Many service agreements include clauses requiring continuous PI cover. Failure to maintain it can constitute a breach of contract, giving clients grounds to walk away or seek damages.
What Happens If You Don’t Have Engineers Insurance?
For engineers, the consequences can be particularly severe. Engineering projects often involve significant public safety considerations. If you design or certify something that later fails, the damages could run into millions.
Without engineers insurance, you would be personally liable for:
- Repair or replacement costs
- Loss of income to third parties
- Property damage claims
- Personal injury claims
- Legal defence costs
Many engineering contracts, especially those involving local authorities or large commercial clients, explicitly require minimum levels of PI cover (often £1 million to £10 million depending on the project). Without it, you simply won’t be able to work on these projects.
If your work involves structural alterations or extensions, you may need basement works included in your PI policy, as this is often excluded from standard policies.
What Happens If You Don’t Have Accountancy Insurance?
Accountants handle sensitive financial information and provide advice that directly affects clients’ tax positions and business decisions. Common claims against accountants include:
- Incorrect tax advice leading to HMRC penalties
- Missed filing deadlines
- Errors in financial statements
- Negligent audits
- Data breaches
Without accountancy insurance, you’ll need to personally compensate the client for any financial loss they suffer because of your mistake. Depending on the size of the client and the nature of the error, this could easily exceed £100,000.
For accountants registered with professional bodies like ICAEW or ACCA, PI insurance is mandatory. Practising without it could result in disciplinary action, including being struck off. You would also lose the right to conduct audits or call yourself a chartered accountant.
No Cover for Past Work
Most PI policies are written on a “claims-made” basis. This means the policy must be active when the claim is made, not when the work was carried out.
If you’ve never held PI insurance, there’s no policy to respond to claims about work you did months or years ago. This creates a long tail of risk.
A client could discover an issue years after you completed a project and make a claim. Without insurance, you’ll bear the full cost of defending and settling that claim. Learn more about how PI insurance responds to historic work.
What If You’ve Let Your Cover Lapse?
Letting your PI insurance lapse, even for a single day, can have the same effect as never having cover at all. If a claim relates to work carried out before the lapse but is made during the gap, you’ll have no cover.
This is why continuous cover is so important. Most insurers offer retroactive cover, but this only works if there are no gaps in your insurance history.
If you’ve recently let your policy lapse, contact a broker immediately. In some cases, cover can be reinstated, but you’ll need to act quickly.
Regulatory and Professional Body Requirements
Many professions require PI insurance by law or as a condition of membership:
- Solicitors (SRA requirement)
- Architects (ARB requirement)
- Financial advisers (FCA requirement)
- Chartered surveyors (RICS requirement)
- Accountants (ICAEW, ACCA requirements)
Trading without the required level of cover could result in:
- Fines
- Suspension from your professional body
- Being struck off
- Criminal prosecution in severe cases
- Inability to practise
Using Subcontractors Without Cover
If you use subcontractors who don’t have their own PI insurance, you could be held liable for their mistakes. Many policies include limited cover for subcontractors, but this isn’t universal.
You should always verify that subcontractors have appropriate insurance and check whether your PI insurance covers subcontractor mistakes.
It’s Not Too Late
If you’re currently operating without PI insurance, arrange cover as soon as possible. While it won’t protect you against claims for work already completed, it will protect you going forward.
Speak to a specialist broker who can assess your circumstances and arrange appropriate cover. In some cases, particularly if you’ve held cover previously, they may be able to negotiate retroactive protection.
Use the button on screen to get a quote. There’s no obligation, and a qualified professional will talk you through your options.
