Professional indemnity insurance does not have one minimum that applies across every profession in Australia. The rules you face depend on your work: legal practitioners can be subject to an approved-policy requirement, AFS licensees are addressed by ASIC’s compensation and insurance guidance, and bookkeepers generally rely on client contracts and any requirements attached to a separate registration. The distinction matters because a legal requirement, an ASIC adequacy benchmark and a contractual obligation are not the same thing.
Legal practitioners: the requirement follows the jurisdiction
If you engage in legal practice in Western Australia, the basic rule under sections 210 and 211 of the Legal Profession Uniform Law is that you must hold or be covered by an approved insurance policy for that jurisdiction. The policy must meet the minimum standards in the Uniform Rules unless you are exempt.
The requirement is not simply for any policy described as professional indemnity insurance. It runs through the approved-policy structure established under the Uniform Law framework.
In New South Wales, the Legal Profession Uniform Law requires solicitors to hold or be covered by an approved policy for NSW before they engage in legal practice in NSW. Similar provisions apply to an incorporated legal practice. Professional indemnity cover is required by all insurable solicitors in NSW unless an exemption applies.
You therefore need to identify where you practise, not just call yourself a legal practitioner. The WA and NSW requirements are expressed by reference to the relevant jurisdiction. Other jurisdictions run their own approved-policy arrangements under the same Uniform Law framework.
Exemptions still need checking
The exemptions are role-specific rather than universal. In WA, exemptions include practising as a corporate or in-house legal practitioner, a government legal practitioner, and a holder of a statutory office.
Corporate and government legal practitioners are also exempt in NSW, except when they engage in legal practice as a volunteer. The WA exemptions have a similar volunteer exception: if an exempt practitioner later engages in legal practice as a volunteer, the approved-policy requirement applies in that event and to that extent.
The Law Society of NSW’s Council also exempts certain categories of solicitors each year, subject to conditions. Those categories may include solicitors in interstate practices, legal aid organisations, community legal centres and overseas practices. You should not assume an exemption applies merely because your work has a public, corporate or charitable character.
Minimum cover for legal practice
The following amounts come from the Uniform Rules standards cited by the Legal Practice Board of Western Australia. They are not a single national statutory limit for every Australian lawyer.
Solicitor law practices
Uniform Rules 78(2) and 78(4) require a solicitor law practice policy to:
- cover civil liability, including professional negligence, incurred in connection with the legal services provided by the practice; and
- provide at least $2 million for any one claim, inclusive of defence costs.
The defence-cost treatment is part of this legal-practice requirement. It should not be carried across automatically to financial advisers, consultants or bookkeepers.
Barristers
Under Uniform Rules 79(2) and 79(4), a barrister’s policy must indemnify civil liability incurred while engaging in legal practice as a barrister within Australia. It must provide:
- at least $1.5 million for any claim, inclusive of defence costs; and
- a minimum aggregate limit of $4.5 million, also inclusive of defence costs.
These are the Uniform Rules figures cited in the WA legal-practice context. The NSW source confirms the approved-policy requirement but does not provide a separate NSW amount in the material reviewed. Do not treat the WA solicitor figure as a national number or assume that one approval answers the requirements of every jurisdiction in which you practise.
AFS licensees: cover linked to retail-client revenue
For financial services, the relevant ASIC source is Regulatory Guide 126, not the legal-practice rules above. RG 126.50, Table 4 sets out the amount of PI cover ASIC considers adequate for an AFS licensee.
If your total revenue from financial services provided to retail clients is $2 million or less, the policy must have a limit of at least:
- $2 million for any one claim; and
- $2 million in the aggregate.
If your total revenue from financial services provided to retail clients is more than $2 million, the minimum cover should be approximately equal to your actual or expected revenue from those services, subject to a maximum limit of $20 million.
That formula is expressed in terms of retail-client revenue, not your total turnover across unrelated activities. When calculating the revenue, you must include revenue received by authorised representatives from providing financial services to retail clients.
RG 126 says revenue may be calculated using the financial year ended before you take out the policy and reassessed at each renewal. Under RG 126.51, ASIC expects you to review your PI insurance or other compensation arrangements at least annually to check that they remain adequate.
RG 126 also identifies responsible entities of registered schemes, corporate directors of retail CCIVs, IDPS operators and MDA providers as groups subject to specific PI requirements. The revenue-linked amounts quoted above are the stated requirements for AFS licensees.
The financial-services figures should not be presented as though defence costs are included within the limits. The legal-practice rules expressly deal with defence costs; the RG 126 figures quoted here do not establish the same treatment for AFS licensees.
Retroactive cover: the item most often bought wrong
Retroactive cover is easy to overlook because a current claims-made policy can be in force while its protection does not extend as far back as the work you need it to cover.
Under RG 126’s definitions:
- Retroactive cover occurs where a claims-made policy extends cover into the past, before the policy was obtained, up to the retroactive date.
- The retroactive date is the date on or after which acts or omissions are covered.
That makes the retroactive date as important as the policy limit when you are checking continuity.
The AFS licensee rule
If an AFS licensee had an immediately previous PI insurance policy, RG 126.50, Table 4 requires the new policy to provide retroactive cover reaching back to the earlier of:
- the retroactive date specified in the immediately previous PI policy; or
- the commencement date of the first PI policy in the series of continuous policies.
In plain language, you need to compare the previous policy’s retroactive date with the start of the continuous policy series. The new policy must reach back to whichever date is earlier.
This rule is conditional on the licensee having an immediately previous PI policy. It should not be paraphrased as an unconditional requirement to trace every policy you have ever held.
Why a gap in policy history matters
A break in a continuous series can move the relevant starting point forward. If the first policy in the later continuous series commenced after the break, that commencement date may be later than the retroactive date previously carried forward.
The new policy’s retroactive reach can therefore stop before the earlier policy’s reach. Acts or omissions before the new retroactive date are not covered retroactively under the new policy. This is how a gap in policy history can create a gap in protection, even if a new policy is subsequently issued.
The RG 126 rule is designed to preserve the earlier retroactive reach where the immediately previous policy and the continuous policy series provide different dates. It does not make an arbitrary new retroactive date irrelevant.
Retroactive cover is not run-off cover
Retroactive and run-off cover solve different problems.
Run-off cover responds to claims made after the policy has ended that arise from acts or omissions during the period of insurance. It is negotiated upfront when the PI policy commences, rather than separately.
RG 126 says a policy is not required to include automatic run-off cover and that automatic run-off cover is not currently available in the market. You therefore cannot assume that a later claims-made policy will automatically deal with everything arising from an earlier period.
Bookkeepers: no general legal minimum
There is no general statutory or regulatory minimum PI cover amount for bookkeepers. The honest position is also that bookkeepers are not generally legally obliged to hold PI merely because they provide bookkeeping services.
That does not remove every possible requirement. Your client contract may require you to carry cover. If you also hold a registration as a tax agent or BAS agent, you must consider any professional-body requirements that apply to that registration.
No minimum cover figure can honestly be stated for bookkeepers as a general category. If you carry PI because of a client contract or a registration-related requirement, the ATO lists professional indemnity insurance premiums among operating expenses that can be deducted.
How to work out what applies to you
Work through the following questions rather than starting with a general Australian PI figure:
- Do you engage in legal practice? Identify the jurisdiction and check the approved-policy requirement under its Legal Profession Uniform Law arrangements. Check whether an exemption applies, including the rules for volunteer legal practice.
- Are you an AFS licensee? Apply the RG 126 retail-client revenue formula. Include revenue received by authorised representatives and reassess the calculation at renewal.
- Are you a bookkeeper? Check the terms of each client contract. If you are also registered as a tax agent or BAS agent, check the requirements attached to that registration.
- What does your policy’s retroactive date say? Compare it with the immediately previous policy’s retroactive date and the commencement date of the first policy in the continuous series.
- Was there a break in cover? Identify what protection applied before the break and whether the new retroactive date reaches back to it.
- Are you relying on run-off cover? Check whether run-off was specifically negotiated. It is not the same as retroactive cover and is not automatically included under RG 126.
The key is to identify the source of the requirement before comparing policies. For legal practice, start with the jurisdiction and its approved-policy rules. For an AFS licensee, start with retail-client revenue under RG 126. For a bookkeeper, start with client contracts and any separate registration. In every case, check the retroactive date rather than looking only at the current policy period and limit.
Sources
- Professional Indemnity Insurance | Legal Practice Board of Western Australia
- Professional indemnity insurance | Law Society of NSW
- RG 126 Compensation and insurance arrangements for AFS licensees | ASIC
Partner links. Using them costs you nothing extra and may earn us a commission.