Business & liability cover
How to Judge a Professional Indemnity (E&O) Policy: The Questions to Ask Before You Buy
Most people buy professional indemnity, or errors & omissions, cover on price. Here is a plain checklist for judging any policy — and any broker, including us — on what actually matters.
Most people buy a PI policy on price; you find out what you actually bought the day a notice arrives.
The short version
- A professional indemnity policy is only as good as its wording — price tells you almost nothing about whether it will respond.
- Check the limit and its AOA:AOY split, whether defence costs sit inside or outside the limit, the retroactive date, run-off, the entities named, the extensions and the exclusions.
- Ask the broker, not just the insurer, how claims are actually handled.
- Use the checklist below to hold any policy — and any broker, including us — to the same standard.
What "good" looks like in a PI/E&O policy
A good professional indemnity (E&O) policy is one whose limit, defence-cost treatment, retroactive date and claims handling will actually carry you through a real claim — not the one with the lowest premium on the comparison sheet.
Two policies at the same price can behave completely differently the day a notice lands. The difference is in clauses most buyers never read. Here is how to read them.
The criteria checklist
Run any quote through these criteria before you look at the premium — each one changes whether, and how far, the policy responds.
| Criterion | What to ask | Why it matters |
|---|---|---|
| Claims-made & retroactive date | From what date is my past work covered, and does it match my prior policy? | A reset date silently drops years of past work from cover |
| Limit & AOA:AOY | What is the per-claim and the annual aggregate, and the ratio between them? | One bad year can exhaust an annual aggregate set too low |
| Defence costs | Are legal costs inside the limit, or paid in addition to it? | Inside the limit, defence spend reduces what is left to settle |
| Run-off / reporting | What happens to claims after I stop trading or sell? | Without run-off you are personally exposed to late claims |
| Insured entities | Are all my trading entities named on the schedule? | An entity left off the schedule may have no cover at all |
| Extensions | Are IP, defamation, loss of documents and confidentiality included? | The right extensions close gaps specific to your work |
| Exclusions | What is carved out, and does any of it describe my everyday work? | An exclusion that hits your core service makes the cover hollow |
| Claims handling | Who manages a claim, how fast, and with what authority? | This is what you are really buying — it is felt only at claim |
The questions to ask a broker, not just the insurer
Ask a broker how a claim is actually handled — who picks up the notice, how quickly, which lawyers, and whether they stay with you until it is settled — because that is the part of the cover you cannot read off the schedule.
A broker who owes a duty to you, the client, should be able to explain the trade-offs in plain language, show you where a wording is thin, and tell you honestly when a cheaper option is the wrong one. That is how Ethika approaches professional indemnity cover. If the answers are all about price, you are talking to a seller, not an adviser.
Red flags
Be wary of a quote that leads only with price, a retroactive date reset to today, defence costs buried inside a low limit, vague claims-handling, or a schedule that does not list all your entities.
None of these shows up in the premium. All of them show up at claim. The point of the checklist is to surface them while you can still choose differently.
For the mechanics behind two of these criteria — the claims-made basis, the retroactive date and run-off — see how a PI/E&O policy actually responds.
Frequently asked questions
What should I look for in a professional indemnity policy?
Beyond the premium: the limit of indemnity and its per-claim to annual ratio, whether defence costs are inside or on top of the limit, the retroactive date, run-off cover, the entities named on the schedule, the extensions and exclusions, and how claims are handled.
Are defence costs included in the limit of indemnity?
It depends on the wording. If defence costs sit inside the limit, legal spend reduces what is left to pay a settlement; if they are paid in addition, the full limit remains for the claim. Always confirm which, because it materially changes the cover.
What is the AOA:AOY ratio in a professional indemnity policy?
AOA (Any One Accident/claim) is the most payable for a single claim; AOY (Aggregate for the Year) is the most payable across the whole policy year. The ratio between them decides how many or how large a year's claims your cover can absorb.
How do I compare professional indemnity insurers without naming a 'best' one?
Compare the policy terms, not the brand: limit structure, defence-cost treatment, retroactive date, run-off, extensions, exclusions and claims handling. A broker who acts for you can map your specific risk to those terms rather than pointing you at one name.
What happens when you talk to us
A 20-minute video call with a Growth Advisor — no obligation, and no quote pushed. It opens with a five-minute video from our founder on how the benefits stack works and why Ethika exists; the rest is your questions. You'll leave with an honest read on your current cover and claims experience, and a straight answer on whether we can genuinely help — even if you never become a client.
20 minutes with a Growth Advisor. No obligation.
A note on this page. Everything here is general information, not insurance, legal, financial or tax advice, and nothing is an offer. For advice about your situation, talk to us.