Meaning Professional Indemnity Insurance
Professional Indemnity Insurance is a type of security that all professionals and businesses need. We all are aware of car insurance and life insurance. Let’s learn about this too. This insurance is vital for every company and organization that provides services or consultations to clients. The Indemnity insurance secures you in the case that when services have caused financial loss or some damage to your client irrespective of intentional or unintentional actions. The client can sue your company and you will have to pay a hefty amount of money as compensation. In those scenarios, Professional indemnity insurance guards you by paying the compensation on your behalf.
The insurance company will take care of the damages, errors, and omissions caused by your organization while delivering professional advice, suggestions, and services. If any individual or any organization seeks the services of your company, and your services don’t prove to be beneficial and create loss instead, then your company is at the edge of getting sued. The insurance companies keep all the data and documents of your company and your client’s confidential. It doesn’t disclose intellectual property while providing services. It is required for a company to have professional indemnity insurance or professional liability insurance.
Who should have Professional Indemnity Insurance?
The safety and security provided by indemnity insurance are important for all companies. It is rather the most important insurance for the professionals and companies that provides services, which may result in creating loss to the customers, in the future. The dicey outcomes of the services are big risks. So, few professionals like,
- The financial advisors
- The healthcare professionals
- The auditors
- The attorneys
- The solicitors
- The architects
- The chartered surveyors
- The accountant
All of these professionals must consult an insurance company right away. Though, other business professionals too can take the advantage of professional indemnity insurance or professional liability insurance.
Here are two things that you all should be aware of-
- The first one is – Professional indemnity insurance doesn’t pay the compensation for reputational damages.
- The next one is- You and your company are not legally bound to have this insurance. This insurance is just for safety purpose and not a legal restriction for any company, business, organization or professional.
What is PLI (Professional Liability Insurance)?
Professional Liability Insurance has also known as E&O (Errors and Omissions) insurance in the US. The PLI pays the compensation to the clients for Errors and Omissions that occurred while delivering the services. Professional liability insurance and professional indemnity insurance are quite similar to each other. Errors & omissions, professional liability insurance, and professional indemnity insurance are different names of each other with similar purposes.
Professional Liability Insurance Cost
The charges of Liability insurance are not fixed. Each insurance company differs in the professional indemnity insurance cost because the number of damages and type of damages is different in each case. The amount of damage caused by a doctor or healthcare professional cannot be similar to the number of damages caused by an architect. The level of destruction caused by an attorney is different from the level of destruction caused by a financial advisor. Moreover, it differs as per the rules of insurance companies too. Professional liability insurance cost is same as professional indemnity insurance cost.
Civil Indemnity Insurance
We have discussed before that professional indemnity insurance does not pay for defamation, any kind of slander or libel, any violation of contract, violation of warranty, guarantee, intellectual property, injury, breach of deal, and cost of contract, etc. But there are few insurance companies that pay for these factors too under ‘civil liability. Still, there are two factors on which civil liability will not pay compensation. Those are employer’s liability and public liability. Except for these two factors Civil Indemnity Insurance will pay your client for more factors than in Professional indemnity cover or professional liability insurance.
Factors that affects the cost of Professional Liability Cost
There are innumerable factors that affect the cost of professional indemnity insurance. We have jotted down a few of the most crucial reasons for our readers. Take a look at the list below-
- There are many types of businesses. Each business creates different type of damages. It is not possible to make a fix cost for all.
- Professionals choose different amount of policy cover. The insurance company will pay according to your decided plan.
- Insurance Policy has a fixed tenure, so there are cases when the mistakes are made before the insurance tenure started and your clients claim after the tenure. Every insurance policy has different rules, so it may vary that how the company will handle this situation.
- Some businesses have high risk factors like healthcare business or medical business. It is also one of the reasons of the difference in prices.
- It is important that where your business in situated. Different regions have different rules and policies.
- How long have you been working or how old your company is, could be one of the key reason.
- The amount of money your company has been making annually is known as yearly turnover of the business. This too affects while making claims
- The number of employees or clients your company have. Is it a small business or a start-up or a big company- Everything matters in deciding the cost professional liability insurance.
- Your business’s commercial credit score also plays a vital role here.
- Here comes the last reason but not the least important one. The past history of committing errors or omissions, history of client base is equally important while deciding the cost