What is Professional Liability or Indemnity Insurance Policy?

Read on to get an overview of what is professional liability insurance or indemnity insurance and how it offers protection to the common man.

The best part about insurance is that it offers a huge variety of policies/plans to an individual, ensuring complete financial protection in different situations of life. One such example is the professional liability insurance policy. Here we discuss what it is and how it helps an individual. Read on to learn more.

What is Professional Liability Insurance Policy or Indemnity Insurance Policy?

Professional indemnity insurance is a type of insurance plan is specifically designed to offer financial coverage to individuals against certain professional risks as well as legal costs. For this reason, it is also sometimes referred to as Errors and Omissions (E&O) Insurance. To put it simply, in case any third party suffers any harm, physical injury (even causing death) or property damage on account of a faulty professional service or advice offered by the person insured under the policy, the Professional Liability Insurance plan comes to the rescue.

The most commonly affected individuals in such cases are generally professionals such as doctors, lawyers, chartered accountants, architects, and the like. A number of professional organizations also avail protection under the indemnity insurance cover, such as law firms, hospitals, BPO centers, and more.

On grounds of malpractice, negligent behavior, or unprofessional attitude in delivery of service to a third party, the insured can be legally sued in a court of Indian law. This is when the Professional Liability Insurance offers coverage for any legal expense that may be incurred due to any omissions, negligence, or errors in the service rendered by a professional, directly impacting a third party by way of property damage or physical harm/injury.

3 Features of Professional Liability Insurance Policy

The following are 3 key features of this cover:

1. The coverage provided under indemnity insurance policy is limited to costs arising out of any legal liability on account of malpractice or negligence by a professional while delivering a service or advice due to which a third party had to sustain physical harm or damage to property.
2. The policy also provides coverage for expenditure related to defending the insured during a legal court case. The lawyer fee and other legal charges pertaining to the defense of the insured in a court of law in India is chargeable to the sum insured under the indemnity insurance plan.
3. Single and group plans are both available under the small business professional liability insurance. Under the group plans, all the members belonging to one particular profession are provided coverage. Depending on the number of members under the group insurance plan, a discount is also offered on the premium payable under the policy.

Eligibility for Professional Liability Insurance Policy

As stated above, this protection cover is specifically meant for professionals involved in rendering services to people of some kind. This would include lawyers, doctors, engineers, architects, counselors, financial advisors, chartered accountants, management consultants, and the like. Their profession involves giving advice or assisting people by way of some professional service.

As is human, sometimes the service delivered by a professional may involve some negligence, omission, error, or even malpractice or unethical/unprofessional behavior. Moreover, on account of any of these, a third-party (recipient of the service) may suffer physical harm or injury, or damage to property (in case of architects).

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In such cases, the professionals, who are also the insured under the plan, can be legally sued by the third party. All legal expenses and liabilities can therefore be borne under the Professional Liability or Indemnity Insurance.

Exclusions Under Indemnity Insurance Policy

Now let’s take a quick look at what is not covered under this protection plan:

1. Any legal expenses or liabilities borne on account of wrongful detention, false arrest, defamation, and the like
2. Liability due to any law violation like fraud, deceit, or any other criminal act
3. Liability for health condition caused or associated with AIDS
4. Rendering of service under the influence of alcohol or drugs
5. Coverage of loss to the insured in terms of market credibility, repute or goodwill

How to Get Professional Liability Insurance Policy?

We discussed above who is eligible to apply for this insurance cover and what all is not included under the plan. Now let’s quickly understand how to file a claim under the Professional Liability Insurance cover plan.

Here are the simple steps required to claim coverage under the policy:

1. The insured needs to submit the claim in writing to the insurance company, covering all the required details of the liability borne.
2. Along with the claim, the insurer would also require the insured to submit relevant documents such as a written report of the exact incident as it happened and some pictures for proof of damage, loss, or harm caused to the third party.
3. Upon verification of the submitted documents and claim report, the insurance company would proceed with processing the claim filed and settle the insurance amount in the name of the insured. Note that the insured would need to pay deductibles to the insurer before receiving the insurance proceeds.

Which Companies Offer Indemnity Insurance Policy?

Considering its dire need in the professional services industry, several leading insurance companies in India are now offering Professional Liability Insurance to customers. A few of the names that are popular in this insurance category include:

• Bajaj Finserv.
• Reliance General Insurance.
• ICICI Lombard.
• New India Insurance.
• United India Insurance Company.

Bottom Line

Professional Liability or Indemnity Insurance is a boon to small business owners rendering professional services to individuals. Since making errors is only human, there is always the likelihood of a mistake when it comes to delivering a service. In case of any harm caused to the third party on account of the error made by the insured during service delivery, a legal case can be ensued against the latter. The professional indemnity insurance India policy thereby provides protection and financial coverage in such situations.

Also read:

• Why Should You Buy an Indemnity Health Insurance Plan
• What Is GIPSA & How Does It Work?

 

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