Professional Indemnity Insurance NZ — Do You Need It? (2026)

Professional indemnity (PI) insurance — also called errors and omissions insurance — protects you against claims that your professional advice, services, or work caused a client financial loss. For any NZ professional who provides advice or expertise for a fee, it’s essential cover.

What Is Professional Indemnity Insurance?

Professional indemnity insurance covers legal costs and damages if a client claims that:

• Your professional advice was wrong or misleading
• Your professional services were negligently performed
• Your design or plans contained errors that caused financial loss
• You breached confidentiality or made a defamatory statement in a professional context

Example: An IT consultant implements a new system for a client. Due to a configuration error, the client loses 3 months of data and faces significant recovery costs. The client claims negligence. Professional indemnity covers the legal defence and the damages awarded.

Example: An accountant fails to identify a significant tax liability, and the client faces penalties and back-tax obligations. Professional indemnity covers the claim.

Who Needs Professional Indemnity Insurance?

Always required:

• Accountants and financial advisers (often a regulatory requirement — FMA-licensed advisers must carry PI)
• Lawyers and barristers
• Architects and engineers
• Medical practitioners (covered by medico-legal organisations, but PI is relevant)
• Insurance brokers (FMA-regulated, PI required)

Usually required by clients or contract:

• Management consultants
• IT consultants and developers
• Marketing and communications agencies
• HR consultants
• Business advisers
• Project managers

Often needed but overlooked:

• Freelance graphic designers (design errors)
• Web developers (website errors causing client loss)
• Copywriters (defamation, intellectual property issues)
• Trainers and coaches (advice-based professional services)

Professional Indemnity vs Public Liability

Many professionals need both. A management consultant working on client premises needs both PI (for advice errors) and public liability (for accidents at the client site).

Retroactive Cover — A Critical Feature

Professional indemnity policies typically cover claims made during the policy period — not when the work was done. This is called “claims made” cover.

This means:

• If you do work in 2024 and a claim is made in 2026 (while your policy is active), you’re covered
• If you cancel your policy and a claim is made the following year, you’re NOT covered — even for work done while the policy was active

Retroactive date: Most PI policies have a retroactive date — the earliest date of work they’ll cover. Work done before the retroactive date is not covered. If you’ve had PI cover for 5 years, your retroactive date may be 5 years back — you’re covered for any claims relating to work done in those 5 years.

Run-off cover: When you stop practising or close your business, you should purchase run-off cover — extended PI cover that covers claims made in the years after you’ve stopped work but relating to work done while you were active. Claims can arrive years after the work was done.

How Much Professional Indemnity Cover Do You Need?

Common limits in NZ:

Client contracts drive the requirement. A major client contract may specify a minimum PI level — often $1 million or $2 million. Government contracts commonly require $2 million+.

What Does Professional Indemnity Insurance Cost?

Premiums vary by profession, revenue, and limit:

Higher-revenue businesses and higher-risk professions pay more.

Related guides:

• Public Liability Insurance NZ
• Business Insurance NZ — What Types Do You Need?
• Insurance for Self-Employed NZ
• Business Insurance NZ Hub