PI insurance pays to defend you, and any compensation you owe, when a client says your professional advice or work cost them money. It works on a claims-made and notified basis: the policy that responds is the one in force when the claim is made and you tell the insurer, not the one in force when you did the work. So cover needs to stay continuous.
Source: https://piinsurance.com.au/how-pi-works/, fetched from the preview https://pi-react-4ee768.pages.dev/how-pi-works/ on 10 Nov 2026; site dated 3 Nov 2026. Preview wording, not yet broker-reviewed. General information, not advice.
Key points
- PI pays to defend you, and compensation you owe, when a client says your work cost them money.
- The policy that responds is the one in force when the claim is made and notified.
- So cover needs to stay continuous.
Claims-made and notified
Most insurance, like car or public liability, covers events that happen during the policy. PI is different. It covers claims made against you during the policy period that you notify to the insurer during that same period. A complaint about work you did three years ago is handled by this year's policy, if you still have one. What claims-made means, with an example.
The policy year
PI is usually bought for 12 months. When it renews, you answer questions again, including whether you know of anything that might become a claim. Tell the insurer about anything you know of before renewal. A known problem you do not mention may not be covered by the new policy.
The retroactive date
Your policy covers work done on or after its retroactive date. If your schedule shows a retroactive date of 1 July 2019, work done from that date onwards can be covered when a claim arrives today. Some policies have no retroactive date limit at all. Why the retroactive date matters.
Why continuous cover matters
Because cover follows the claim date, a gap is risky. If you let PI lapse for six months and a claim arrives in that gap, there may be no policy to respond. Some policies include a continuous cover clause that can help when you renew with the same insurer and a disclosure was missed by mistake. Do not rely on it: keep the policy running and disclose what you know.
Limits: per claim and aggregate
Your limit is the most the insurer pays. Per claim means the most for any one claim. Aggregate means the most for all claims in the policy year. Some policies reinstate the limit after it is used, with conditions. Contracts often ask for both, such as "$2m per claim and in the aggregate". How to choose a limit.
Excess
The excess is the amount you pay towards each claim. Depending on the policy, it may apply to defence costs, to compensation, or to both. A higher excess usually lowers the premium a little.
Defence costs
PI pays lawyers to defend you, even if the claim has no merit, as long as it is covered. Some policies pay defence costs in addition to your limit. Others count them within the limit, which leaves less for compensation. Ask which yours does.
Common questions
Does PI cover claims about work I did before I bought it?
Only if that work was done after the policy's retroactive date and you did not already know of the problem when you bought the policy.
Do legal costs come out of my limit?
It depends on the policy. Some pay defence costs on top of the limit, others include them within it.
What happens if I let my PI lapse?
A claim made while you have no policy may not be covered, even if the work was done while you were insured.