If you are alleged to have provided inadequate advice, services or designs to a client, professional indemnity insurance provides cover for the legal costs and expenses in defending the claim, as well as compensation payable to your client to rectify the mistake.
The word ‘indemnity’ refers to protection against a financial loss, therefore as the name suggests itself, Professional Indemnity Insurance cover is designed for a target group that includes architects, doctors, engineers, chartered accountants, lawyers, medical practitioners to protect their business from legal claims. Whether you own a small or big business, you may be accused of providing poor services, advices or designs that cause your client monetary losses.
In this litigious world, one single legal liability is enough to ruin your position in the market or for the rivals to take-over you. Professional Indemnity Insurance policy covers you for all these expenses and safeguards your business.
Regardless of how many years of experience your firm may have, there is always the possibility you or one of your team members could make a mistake. You may need professional indemnity insurance, if you:
No matter how large or small a business, without professional indemnity cover your financial position could be left vulnerable if a claim is brought against you. Hence, having an adequate insurance plan in place will give you peace of mind that your organization is covered.
Professional indemnity insurance covers against a wide range of scenarios, including:
Professional indemnity insurance can be availed by the following group of professionals:
Doctors’ Professional Indemnity is an insurance cover specially designed for the professionals to cover them against the liabilities arising out of an error or omissions committed while rendering services to their respective clients.
This policy is meant for registered medical practitioners like physicians, surgeons, cardiologists, pathologists etc. The policy covers the legal liabilities to be paid by the professional for damages to the third party while offering services, the legal cost incurred in defence of the case, subject to a limit. The policy covers only civil liability claims where any claims arising out of criminal or unlawful activities will not be covered.
The exclusion list of personal indemnity insurance cover includes:
The sum insured for Professional Indemnity Insurance Policy is decided based on the limit of indemnity. The limit is known as Any One Accident (AOA) Limit and Any One Year (AOY) limit which is fixed for per accident. The insured can choose the ratio of AOA to AOY from the below-given options:
However, the AOA limit, which is the maximum payable amount during a claim, should be decided by taking into consideration of the nature of work of the policyholder and the maximum number of persons that could be affected or maximum property damage that is expected to occur, during an accident. Generally, AOA limit is confined to 25% of the AOY limit.
Whatever the case, the sum insured should be selected in such a manner that it covers any legal compulsion that the insured may face at any point of time.
India only accepts civil liability claims that arise out of the negligence of the policyholder causing injury or death to any other party or causing damage to property that belongs to a third party.
In such cases that can spark into a liability claim, the insurer should be informed immediately. If the insured receives any legal notice or summon, that should be sent to the insurer right away. Further, the company will arrange for the defense of a particular case, whenever required. The insured can use the insurance only if the incident has occurred during the policy tenure and the claim is first made in writing. The insurer will pay the maximum amount including the defense cost, in other words, the chosen AOA limit. With the claim amount or any indemnity paid for an accident, AOY limit goes down. Such claims will be covered up to the total indemnity but not more than the AOY limit.
However, the insurer will not cover you for the claim that occurs as result of intentional non-compliance or contractual liability, mental injury, libel, slander etc.
PolicyBazaar will help you buy insurance plans that are tailor-made to meet the unique requirements of your business. Through our easy user interface you can compare professional indemnity insurance quotes and purchase the best-suited policy as per your business needs.
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Is professional indemnity insurance obligatory?
There is no hard and fast rule that you should buy professional indemnity cover but yes, this protects your business against sudden legal liabilities or lawsuits. So, we suggest one should opt for this cover.
Should I buy professional indemnity insurance?
If you own a business or in a profession with higher risks then yes!
Is there any limit of professional indemnity that I need?
The amount of indemnity can be decided based on your need and the type of business you own.
Who can buy Professional Indemnity cover?
The policy is designed for professionals such as:
Registered medical practitioners like physicians, pathologists, surgeons, cardiologists etc.
1. Medical institutes such as hospitals, nursing homes for their errors or omissions while rendering services
2. Engineers, architects and interior designers
3. Advocates, Lawyers, solicitors and counsellors
4. Chartered accountants, financial accountants, management consultants
What are the exclusions of Professional Indemnity Insurance?
The policy doesn’t cover:
1. Claim arising out of criminal activities
2. Any claim is filed after the insurance policy has expired
3. Regular accidents that are not part of the insured property
4. If the business is at stake of regular terrorism or threat to a terror attack, you’ll have to look for some other option, as Professional Indemnity insurance doesn’t cover a terrorist attack
5. Liability arising out of contractual basis
6. The policy doesn’t cover the dispute between the employer and employee
How to claim Professional Indemnity Insurance?
In case of any event probably giving rise to a liability claim should be intimated to the insurer immediately. In case of any summons, it should be sent to the insurance provider without a delay. The insurer will further arrange for the defence of the case.
The insurer will pay the maximum amount up to the AOA limit under the policy. The Any One Year (AOY) limit will be decreased with the amount of claim paid for any one accident. Any such claims made during the policy tenure will be covered up to the total insurance limit not exceeding the AOY limit.
However, the insurer will not pay for any claim arising out of contractual liability, intentional damage, fines, loss of goodwill, libel, false arrest, mental injury etc.
Is Professional Indemnity Insurance Compulsory?
In India, Professional Indemnity Insurance is not compulsory. However, professionals should consider buying this policy.
What will be the cost of professional indemnity insurance?
The cost of professional indemnity will be based on certain factors such as the nature of work you do, the risk involved, the number of employees you have or the level of cover or sum insured you require. The insurance provider will first assess your situation and will inform the amount of premium to be paid. Sometimes, the cheaper plan may not fully provide sufficient coverage. So, analyse your needs before zeroing down on a particular insurance policy.