Professional indemnity insurance protects you against mishaps that may result from your professional advice. It ensures that you are not bankrupted by legal action based on what at the time of the event and given the information that was available to you was genuine guidance aimed at benefiting your client.
Professional Indemnity insurance covers any legal costs that may come out of a client taking legal action against you, as well as any compensation that also falls to you if you end up losing the lawsuit. This could be loss of sales revenue for example, is a successful claim against you is proven that your client lost revenue as a result of your incorrect advice. The cover is based on your professional skills, so for example, accounting PI insurance protects against financial loss and related lawsuits, engineering PI insurance protects against problems arising from incorrect advice that may result in additional project costs and re-engineering and marketing PI insurance protects against making a spurious declaration on a product or service that results in a lawsuit.