Financial Planner Insurance

Sometimes, even the most experienced financial planners can make mistakes. Such errors and misunderstandings often lead to financial losses for clients. As financial advice is becoming increasingly complex and highly regulated, protecting yourself and your business is now more crucial than ever. Hence, within an industry with such high stakes, professional indemnity insurance acts as an essential safeguard for financial advisors.

Whether you’re an independent advisor or part of a larger corporation, professional indemnity insurance will provide you peace of mind when navigating the common complexities and challenges associated with your profession. By investing in professional indemnity insurance, financial planners not only safeguard themselves but also demonstrate professionalism and accountability towards their clients.

Professional Indemnity Insurance

Professional indemnity insurance, sometimes known as professional liability insurance, protects financial advisors from potential risks they may face when giving advice or providing a service to a client. As a financial advisor or planner, you’ll be protected against claims of negligence or breach of duty as a result of inaccurate or misleading information provided to one or more of your clients.

For instance, professional indemnity claims can arise when:

  • You mistakenly recommend an investment product.
  • You forget to disclose critical details about a financial product.
  • Miscommunications and misunderstandings arise in relation to fees, terms, or expected returns.
  • There’s administrative errors, including lost and damaged documents.
  • There’s negligence in conducting due diligence.
  • There’s a breach of confidentiality.
  • You fail to comply with industry standards.
  • There’s a conflict of interest… and more

Such claims are not only highly complex to resolve but also involve mounting legal fees. In the worst case scenario, it could impact your reputation as a financial advisor.

However, with professional indemnity insurance, you gain access to expert legal representation. The insurance typically covers defence and settlement costs, allowing you to protect your personal assets and your business if things were to take a turn for the worse.

Frequently Asked Questions

1 What Does Professional Indemnity Insurance Cover?

Depending on the type of policy selected, your professional indemnity insurance may offer coverage for:

  • Investigation costs associated with claims
  • Coverage for contractors, specifically for claims related to the performance of services by consultants, contractors, subcontractors, etc
  • Reputation management costs
  • Public and products liability cover
  • Legal defence costs
  • Advice misrepresentation
  • Copyright claims
  • Unintentional mistakes

It is important to remember that you’ll only be covered for circumstances that are included in your policy package, so it’s necessary to select the right type of cover for yourself.

2 What is Excluded?

Professional indemnity insurance typically excludes: 

  • Illegal or criminal activities 
  • Intentional misconduct
  • Fraud 
  • Breach of contract 
  • Known circumstances 
  • Bodily injury 
  • Property damage 
  • Contractual liabilities 
  • Regulatory penalties 
  • Cyber attacks 
  • Employee disputes
  • Bankruptcy 

Hence, it is important to review your professional indemnity policy details with your insurer to understand the exclusions that apply.

3 Why Do You Need Professional Indemnity Insurance?

Many different professions provide advice to clients. From accountants to fitness instructors, these professionals offer information and guidance to clients reliant on their services. 

With professional indemnity insurance, you can safeguard yourself and your business by ensuring you aren’t financially devastated due to the legal costs and claims that may arise. 

This provides you with peace of mind. Knowing that you’re protected allows you to focus on the task at hand without worrying about disputes or legal battles.

4 What is the Minimum Cover Required?

What is the Minimum Cover Required?
The minimum cover required depends on your specific industry and profession.

Some industries have mandated minimum levels of coverage. For example, professions such as accountants are regulated by CPA Australia which typically requires a coverage amount starting at $2 million.

Alternatively, some clients may specifically require a minimum level of cover in contacts. This is typical for high-value projects or agreements.

As a financial planner, consider the size of your projects alongside the potential financial impacts of errors. Likewise, evaluate the likelihood of claims. An experienced insurance broker can then guide you towards selecting an accurate policy coverage.

5 Why Choose CIG Insurance?

CIG Insurance offers a streamlined way to compare multiple insurance providers and find the best policy for your needs. We’re proud partners of the Steadfast Network, Australasia’s largest general insurance broker network. With nearly 30 years of experience, Steadfast helps Australians across the country select the right insurance coverage. Through this partnership, we’re able to offer a range of exclusive insurance products and services.

As a financial planner, professional indemnity insurance provides more than adequate financial cover in the event an unexpected claim arises.

Safeguard yourself and your business today.
Contact us for more information.

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