Most tradies know they need public liability cover for the drill through the water pipe. Far fewer realise that the advice, design and certification they provide carries a different risk - one public liability won't touch. That's where professional indemnity insurance - sometimes called professional liability insurance - comes in. This guide explains what it covers for NZ trades and consultants, who genuinely needs it, how it differs from public liability insurance, and what it typically costs.
This guide is general information for NZ trade businesses, not financial or insurance advice. Cover, limits and exclusions vary between insurers - always read the policy wording and consider talking to a licensed insurance broker or financial adviser before you buy.
What professional indemnity insurance covers
Professional indemnity (PI) protects you against claims of financial loss caused by a professional mistake. That includes:
- Negligent advice - you tell a client a design will work, a method is compliant, or a product is fit for purpose, and it isn't.
- Errors in design or specification - a plan, drawing or spec that's wrong and causes the client a loss to fix.
- Faulty certification or sign-off - you certify work that doesn't meet code, or miss a defect you were engaged to check.
- Breach of professional duty - failing to exercise the reasonable skill and care expected of someone in your role.
Crucially, PI responds to the financial consequences of getting it wrong - the cost to redo a design, rectify work built to a bad spec, or the loss a client suffers relying on your advice. It also typically covers the legal costs of defending the claim, even where the claim turns out to be unfounded.
Public liability vs professional indemnity - the key difference
This is the distinction that trips people up most, so it's worth being precise:
| Public liability | Professional indemnity | |
|---|---|---|
| Protects against | Physical damage or injury you cause | Financial loss from your advice, design or certification |
| Typical trigger | Drill through a pipe, ladder dents a car, someone trips over your gear | A design error, wrong specification, negligent advice |
| Type of loss | Tangible - property or people | Intangible - money lost relying on your professional skill |
| Who needs it | Almost every trade | Anyone who designs, advises, certifies or specifies |
A simple way to remember it: public liability is for what your hands do; professional indemnity is for what your head says. If your work involves giving an opinion a client pays to rely on, public liability alone leaves a gap. See our public liability insurance NZ guide for the other half of the picture, and the tradie insurance NZ hub for how the covers fit together.
Who actually needs professional indemnity in NZ
You should seriously consider PI if any part of your work involves a client paying for your judgement, not just your labour. That commonly includes:
- Designers and draughtspeople - building designers, kitchen and bathroom designers, anyone producing plans others build from.
- Licensed Building Practitioners who design or certify - where you carry design responsibility or sign off restricted building work.
- Project managers and consultants - coordinating trades, specifying methods, or advising on compliance.
- Anyone giving paid advice - telling a client what product, system or method to use, where they'll suffer a loss if you're wrong.
- Trades that certify or commission systems - for example signing off an installation as compliant.
Many head contractors, councils and commercial clients now require PI cover (often $250k-$1m or more) in their contracts before they'll engage you for design or consultancy work. So even where you judge the risk is low, the contract may make the decision for you.
If you only ever swing a hammer to someone else's plan and never give advice a client relies on, you may not need PI. The moment you start designing, specifying or certifying, the picture changes.
A note on "claims-made" cover
PI is almost always written on a claims-made basis. That means the policy that responds is the one in force when the claim is made against you, not when you did the work. Two practical consequences:
- Keep cover continuous. A gap can leave old work uninsured even though you held PI at the time.
- Consider run-off cover when you stop. If you retire or wind up the business, claims can still surface for years. Run-off cover keeps you protected for past work after you've stopped trading.
Claims examples
A few realistic scenarios to make it concrete:
- A building designer specifies a cladding detail that later leaks. The fix runs to tens of thousands. PI responds to the client's financial loss; public liability would not, because it's a design error, not accidental physical damage.
- A consultant advises a client a renovation doesn't need consent. It does. The client faces rectification and council costs and claims against the consultant's advice.
- A tradesperson certifies an installation as compliant; a defect is later found that the certification missed. The cost of putting it right is claimed back.
What it typically costs
As a rough guide, PI for a small design or consultancy operation often starts in the low hundreds to low thousands of dollars a year, rising with your turnover, the cover limit, and how risky your work is judged to be. Design and certification work generally costs more to insure than pure advice. Treat any figure as indicative only - the right move is to get a quote based on your actual work and the limits your contracts require.
How to get the right cover (and a fair price)
Insurance is easy to over- or under-buy. A few practical steps:
- Get two or three quotes. Premiums and exclusions vary a lot between insurers for the same trade. Compare like-for-like cover, not just price.
- Use a broker for anything complex. A licensed insurance broker can match cover to your trade and contracts - and they're usually paid by the insurer, not you.
- Read the exclusions and the excess. The exclusions decide whether a claim actually pays out. Check the excess (what you pay per claim) and any per-item limits.
- Match cover to your contracts. If a main contractor, council or commercial client requires a specific limit (often $1m-$5m public liability), your policy has to meet it before you can start.
Sorting cover is one half of protecting your business; getting paid on time is the other. See managing cashflow as a tradie for the income side.
Frequently asked questions
Is professional indemnity the same as public liability?
No. Public liability covers physical damage and injury your work causes; professional indemnity covers financial loss from your advice, design or certification. Trades that both build and design often need both.
Do I need professional indemnity if I only follow other people's plans?
Often not - if you never give advice or carry design responsibility, the risk PI covers may not apply to you. As soon as you design, specify, certify or advise, you should consider it.
Why is professional indemnity "claims-made"?
The policy that responds is the one in force when a claim is made, not when you did the work. That's why keeping cover continuous, and arranging run-off cover when you stop trading, matters.
How much professional indemnity cover do I need?
Enough to meet what your contracts require - often $250k-$1m or more for design and consultancy work - and to cover the realistic cost of a mistake on the jobs you take. A broker can match the limit to your work.
Sources
- business.govt.nz - business insurance
- Insurance Council of New Zealand (ICNZ)
- Consumer NZ - insurance
- WorkSafe NZ - Health and Safety at Work Act 2015
- ACC - cover for businesses
Update log
- 24 June 2026 - Published. General information reviewed against New Zealand industry and government sources (see Sources above).
Last reviewed: 24 June 2026.
Is professional liability insurance the same as professional indemnity?
Yes. 'Professional liability insurance' is the term used overseas for what New Zealand insurers call professional indemnity. Both cover the same thing - claims that your advice, design or professional service caused a client a financial loss. If a NZ client or contract asks for 'professional liability' cover, a professional indemnity policy is what they mean.
Who needs professional indemnity - is it just for consultants?
No. Any business paid for its expertise can face a claim. That includes designers and creatives such as graphic designers, architects, engineers, IT contractors, bookkeepers, and tradespeople who design or specify work. If clients rely on your advice, plans or recommendations, professional indemnity is worth carrying.