Professional Indemnity Insurance protects professionals such as Doctors, Architects, Chartered Accountants, etc. for committing any error or negligence while providing their services that cause any loss or damage to their clients.
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Get ₹1 crore insurance cover starting at ₹2,500/year+
Get ₹1 crore insurance cover starting at ₹2,500/year+
Get ₹1 crore insurance cover starting at ₹2,500/year+
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Professional Indemnity Insurance is important for the following reasons:
In the event of a claim or legal action against your business, professional indemnity insurance provides financial protection by covering legal expenses, settlement costs, or damages awarded.
Whether you run a small startup or a large corporation, professional indemnity insurance offers coverage that is tailored to your specific business needs, mitigating the risks associated with professional services.
Having professional indemnity insurance in place provides peace of mind, knowing that your organization is safeguarded against potential liabilities and unforeseen circumstances that could arise from professional mistakes or negligence. It allows you to focus on your work without constant worry about potential legal or financial repercussions.
If your business deals with sensitive client or business data, there is a risk of data breaches or loss. Professional indemnity insurance can provide coverage for the financial consequences resulting from data mishandling.
Professionals who offer advice or guidance are exposed to the risk of errors or omissions that can lead to financial harm for clients. Professional indemnity insurance covers claims arising from such situations.
Professionals are vulnerable to claims challenging the quality or effectiveness of their services. Professional indemnity insurance safeguards against financial losses resulting from legal actions taken by dissatisfied clients.
Professional indemnity insurance covers the following:
Tail reporting cover is an add-on that the insured can purchase along with professional indemnity. It is also known as extended reporting endorsements cover, which is a type of insurance that covers the incidents that occurred within the tenure of the indemnity insurance but were not reported until the termination of the policy.
Extended coverage is offered by some insurance companies if the insurance policy remains non-renewed for that time. Of course, the extended coverage gives rise to the premium, which has to be paid if the tail reporting coverage needs to be used for claims.
Let us now tell you about the Limit of Indemnity in the professional liability insurance policy:
The ratio options for AOA limit to AOY limit, what it means and examples related to each of them are mentioned in the table below:
Limit of Indemnity | Meaning | Example |
1:1 | Full sum assured for any one claim. | If the insured has opted for the sum insured of Rs. 1 Crore and if a claim arises during the policy tenure then the insured can get coverage up to Rs. 1 Crore for 1 claim. |
1:2 | Maximum 50% of the sum assured for any one claim. | If the insured has opted for the sum insured of Rs. 1 Crore and if a claim arises during the policy tenure then the insured can get coverage up to Rs. 50 Lakh for 1 claim and up to Rs. 50 Lakh for one more claim. |
1:3 | One-third of the sum insured for any one claim. | If the insured has opted for the sum insured of Rs. 1 Crore and if a claim arises during the policy tenure then the insured can get coverage up to Rs. 33.33 Lakh for 1 claim and can get coverage up to Rs. 33.33 Lakh for two more times respectively. |
1:4 | 25% of the sum insured for any one claim. | If the insured has opted for the sum insured of Rs. 1 Crore and if a claim arises during the policy tenure then the insured can get coverage up to Rs. 25 Lakh for 1 claim and can get coverage up to Rs. 25 Lakh for three more times respectively. |
Note 1: The AOA limit should be determined based on factors such as the insured's nature of the activity, the potential number of people affected, and potential property damage in the worst-case accident.
Note 2: When considering the coverage, it is important to assess the adequacy of the sum insured and the chosen extensions.
You may also read:Â Indemnity Insurance for Chartered Accountants
Professional liability insurance does not provide coverage for the following:
*Disclaimer: To learn about the exclusions in detail, you can refer to the policy wording of the insurance product.
Professional indemnity or Errors and Omission insurance can be availed by individual professionals or by companies providing professional services. Here is a table of individuals and entities that can purchase professional indemnity insurance:
Individual | Entities |
PI for Doctors PI for Architects PI for Lawyers PI for Chartered Accountants PI for Contractors PI for Management Consultants PI for Interior Decorators, etc. |
PI for IT/Ites Companies PI for e-commerce PI for Fintech PI for Manufacturing Company PI for Banks PI for Hospitals, etc. |
Here are certain factors that you should keep in mind while purchasing indemnity insurance:
Choose an appropriate sum insured based on the nature and magnitude of risks associated with your business, ensuring adequate coverage for potential claims.
Full disclosure is crucial when obtaining insurance. Provide all relevant details, no matter how insignificant they may seem, to avoid claim rejection and ensure the effectiveness of the insurance policy.
Ensure that the insurance policy's features align with your business requirements. If your business deals with international clients, opt for a policy that provides coverage beyond domestic borders to meet your specific needs.
Here’s how it works:
Here’s a condition:
A triggering event for professional indemnity insurance is typically when a claim is made against the insured for an alleged error, omission, or negligence in their professional services. Let's consider a case scenario to understand this:
Dr. Sharma is a surgeon who specializes in orthopedic procedures. He has a professional indemnity insurance policy in place. One day, Dr. Sharma performs a knee replacement surgery on a patient, Mr. Varun. However, during the surgery, Dr. Sharma inadvertently makes an error, resulting in complications for Mr. Varun.
As a result of the surgical error, Mr. Varun experiences prolonged pain, limited mobility and requires additional medical treatment and rehabilitation.
Dissatisfied with the outcome, Mr. Varun decides to take legal action against Dr. Sharma, claiming medical negligence and seeking compensation for the damages he has suffered.
In this scenario:
***It is important to note that professional indemnity insurance coverage is typically triggered when a claim is made during the policy period, regardless of when the alleged incident actually occurred.
Here is what you have to do in case of an incident that requires you to raise a claim:
KYC Documents Required
Disclaimer: These are the basic documents required. However, in case of any additional requirement/LOR, the insurance company will inform the Policybazaar claim handler who will then inform and help you in collecting and submitting them to the insurance company.
Disclaimer: There is a particular percentage of the sum insured amount decided up to which the insured gets coverage for the lawyer’s fee. (Example: If the sum insured amount is Rs. 100 and the lawyer’s fees are covered up to 25% of the SI then the insured will get lawyer’s fee coverage for up to Rs. 25 and not more than that. It is subject to the terms and conditions of the insurance policy)
Also, in some cases, if the insurance company wants, they can deploy their lawyer in service of the insured, however, if the insured has already deployed his lawyer then the coverage will be provided as per the above-mentioned condition.
The retroactive date is the date that the insured first bought the policy and kept renewing without any break in the coverage.
Let's take an example to illustrate the concept more clearly:
Transferring retroactive date from the old insurer to the new one refers to the point when the new insurer takes the responsibility to provide coverage for any claim that might come up from the policy tenure of the old one.
*Condition: There should be no gap between the old policy and the new one.
Professional indemnity insurance for doctors provides specialized coverage against claims for negligence, errors, or omissions in their services. It safeguards doctors from financial losses and allows them to focus on quality care without constant litigation concerns. The insurance includes legal defense, settlements, and damages, up to the policy limit.
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