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Professional Indemnity vs Employers Liability

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Are employers liability and professional indemnity the same?

Employers Liability vs Professional Indemnity

Employer's Liability insurance is designed to protect businesses from financial losses due to employee claims of injury or illness caused by work-related activities. Professional Indemnity insurance, on the other hand, offers protection against financial losses resulting from claims of professional negligence, errors, or omissions made by the business or its employees.

Why do these two types of insurances exist?

Legal Requirements

In New Zealand, Employer's Liability insurance is mandatory for businesses, ensuring that employees are protected in case of work-related injuries or illnesses.

Financial Protection

Both types of insurance provide crucial financial protection. Employer's Liability covers the cost of compensation and legal fees if an employee sues for injury or illness. Professional Indemnity protects against financial losses from legal actions taken by clients or third parties due to professional mistakes or negligence.

Reputation Management

Having the right insurance helps in maintaining a business's reputation. It shows responsibility, builds trust with employees and clients, and ensures business continuity in the face of potential legal challenges.

What exactly do these insurances cover?

  • Employer’s Liability Insurance: This type of insurance covers work-related illnesses and injuries that employees might suffer. It helps pay for medical costs, legal fees, and compensation if the employee cannot work. Examples include an employee slipping on a wet floor or developing a repetitive strain injury.
  • Professional Indemnity Insurance: This covers financial losses due to mistakes, negligence, or inadequate advice provided by the business or its employees. This is crucial for businesses offering advice or professional services, as it protects against the cost of defending against a negligence claim and damages awarded.

How do these insurances work?

  • Employer’s Liability insurance kicks in when an employee files a claim for a work-related injury or illness. The business’s insurance policy helps cover the financial aspects of the claim, including medical costs and potential compensation.
  • Professional Indemnity insurance works by providing financial coverage when a client or third party makes a claim against your business for professional errors, omissions, or negligence. The insurance helps pay for legal defense and any damages awarded, up to the policy limit.

Disadvantages/Advantages or Pros/Cons

Employers Liability Insurance

  • Legal Compliance: Ensures that the business is adhering to New Zealand’s legal requirements.
  • Employee Protection: Provides a safety net for employees, fostering a positive work environment.
  • Financial Security: Protects the business from potentially crippling financial losses due to employee claims.
  • Cost: Can be expensive, depending on the business’s industry, size, and risk factors.
  • Limited Coverage: Does not cover claims from contractors or non-employees.

Professional Indemnity Insurance

  • Client Trust: Builds trust with clients, showcasing the business’s responsibility.
  • Risk Management: Provides a financial cushion against claims of negligence or professional mistakes.
  • Reputation Protection: Helps in maintaining and protecting the business’s reputation.
  • Complexity: Policies can be complex and require careful review to understand coverage limits and exclusions.
  • Cost: Can be expensive, especially for businesses in high-risk industries.

Common misunderstandings

What are some common misunderstandings about these insurances?

  • Some businesses may believe that Employer’s Liability insurance covers all work-related injuries, regardless of fault. However, it only covers work-related injuries or illnesses suffered by employees.
  • There is a misconception that Professional Indemnity insurance is only for certain professions. In reality, any business that provides advice or services could benefit from this coverage.
  • A common misunderstanding is that having one of these insurances negates the need for the other. However, they cover different risks and both are essential for comprehensive protection.

How can Gerrards help?

How can Gerrards, as an insurance broker, assist businesses with these insurances?

  • Gerrards, specializing in business insurance in New Zealand, offers expert advice tailored to your business’s unique needs.
  • We help in evaluating your business risks, ensuring you have the right coverage in place.
  • Gerrards provides ongoing support, assisting in claims processes and ensuring that your business is always adequately protected.

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