If your startup sells services- or delivers outcomes clients rely on- your risk isn’t limited to physical damage or employee issues. Your client can claim your work caused them financial loss. That’s where Professional Indemnity (PI) Insurance, also called Errors & Omissions (E&O), becomes relevant.

PI/E&O is designed to help cover legal defence costs and damages arising from allegations of negligence, errors, or omissions in professional services, subject to policy terms and conditions.

What PI/E&O typically covers 

Depending on the wording, PI may respond when a client alleges things like:

• You made a professional error that caused them a financial loss
• You missed a deliverable or failed to meet a defined scope/standard
• Your advice, design, or service output was deficient
• A software service defect/bug caused the client loss (common in tech services, but coverage depends on how services are defined and exclusions are drafted)

It’s not an admission of fault- it’s a financial tool for handling allegations and legal disputes.

Why startups feel PI pain early

Startups often operate with:

• Tight timelines and evolving scope
• Multi-vendor dependencies (APIs, cloud, subcontractors)
• Aggressive SLAs, penalties, and client contracts
• Small teams where one missed change request can cascade into disputes

Even strong teams can face claims because expectations, documentation, and timelines aren’t always perfectly aligned.

PI vs D&O: Don’t mix these up

They protect different things:

• D&O: Protects directors/officers against management/governance-related claims (shareholders, regulators, employees, etc.)
• PI/E&O: Protects the business against client claims tied to professional service delivery failures

A useful rule: if the dispute is about “how you ran the company,” think D&O. If it’s about “what you delivered to a client,” think PI.

What to check before buying PI/E&O

• Define “professional services” correctly: your scope must match how you actually work (consulting, development, implementation, managed services, etc.)
• Retroactive date: important for claims-made policies; it impacts whether earlier work is covered when a claim arises later
• Indian PI policies are claims-made and require continuous renewal to maintain retroactive protection.
• Exclusions: common ones can include contractual penalties, guarantees, known circumstances, IP issues, cyber incidents, or bodily injury/property damage (varies by wording)
• Indemnity limit and deductible: match to contract sizes and worst-case dispute costs
• Territorial/jurisdiction clauses: especially if you serve overseas clients