Professional Indemnity Insurance
If your work involves consultancy services or providing professional advice, you may need protection when unintended bad circumstances happen. Some clients may file claims for any resulting financial loss or damage to reputation. Professional indemnity insurance offers the kind of protection intended for professionals. These include professions such as accountants, architects, engineers, independent financial advisers, IT professionals, management consultants and medical practitioners. Any professional person providing services is regarded by their client as an expert or a professional. Therefore, they are open to a claim being made against them. Professional indemnity insurance is currently held by workers across a wide range of industries.
Professional indemnity insurance, also called PI insurance, provides protection in cases of negligent advice, or an error in the service you provided. Professional indemnity insurance covers legal fees and costs. Some of the most common liability lawsuits arise from circumstances such as unintentional slander or libel, unintentional breach of intellectual property rights, loss of client’s original documents, or breach of confidence.
Do you really need professional indemnity insurance? Generally, the riskier the type of job, the more need you have for professional indemnity insurance. If you are a medical practitioner for example, you tend to deal with people’s lives every day. You will have irregular sleeping hours due to the nature of your job. No matter how good you are at your trade, there will be times when the stress of the job could affect your judgment. In case something unintentional goes wrong, professional indemnity insurance will serve as your financial and professional protection against lawsuits from patients and clients.
Professional indemnity insurance coverage
Professional indemnity insurance covers legal fees as well as any damages payable in case a lawsuit is filed against you. It protects you against damages you become liable for mistakes resulting to loss of business and damage to reputation. These include basic administration errors, misplacement of client’s original documents, errors in judgment and the likes. However, professional indemnity insurance may not include claims above an agreed amount, specific vetoed activities, overseas work, retroactive cover or cover if your policy has not been renewed.
An insurance company can approve or deny you of professional indemnity insurance based on several factors. These factors would include location of the business, claims history, type of industry and amount of coverage. The premium amount usually reflects the degree of risk as determined by the given factors.
Risks of not having professional indemnity insurance
There are several professions that actually require having professional indemnity insurance such as medical practitioners and legal advisers. Their jobs can pose great risk to their business and reputation once a lawsuit is filed against them for any unforeseen circumstance. If you don’t have professional indemnity insurance, you will be held liable for the full award amount won in court including legal fees. This could drive a business to bankruptcy as it can cost millions of dollars. Not only that, even if the business has been closed, the liability does not end there. A client can still sue a professional years after the business has already been closed. That is why an add-on ‘run-off’ policy can be added to the professional indemnity insurance for such scenario. Run off coverage can provide a professional protection even after years of shutting down his or her business.