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What is Professional Liability Insurance?

A Professional Liability Insurance (also called Professional Indemnity Insurance) is something that is there to protect businesses or even professionals who provide services or advice, such as accountants, lawyers, or doctors, against any claims of negligence or unintentional breach of a written contract, or infringement or misappropriation of any intellectual property from their clients.

For example, if you own an architectural firm, and had an understanding with a client to complete a construction by a set date, but it’s finished a few months behind schedule. If the client files a suit to recover the costs related to the building delays, it can lead to heavy financial losses plus substantial legal fees.

So, in case you face such a situation with your professional services, if you are covered by a Professional Liability insurance, you will be protected against financial loss arising from these kinds of claims. 

Why do you need a Professional Liability Insurance?

A Professional Indemnity or Professional Liability Insurance, will protect any companies and professionals against claims made against them by clients of things like inadequate work, errors, or negligent actions. But why do you really need it?

You and your business will be protected against huge legal expenses in case someone makes a claim against you.
However competent and honest you and your business are, you can never tell when you will be unlucky.
It will help your business run more smoothly, as you won’t need to worry about expensive lawsuits.
This policy is specially designed for the risks faced by professionals and businesses when it comes to their services.
Your customers and clients will appreciate the guarantee of being compensated in case something goes wrong.

What is covered in a Professional Indemnity Insurance?

When you get a professional indemnity insurance, you’ll be covered for...

Professional negligence

Professional Negligence

In case someone raises a claim against you (or your employees) for any negligent acts or some unintentional error.

Bodily Injury and Property Damage

Bodily Injury and Property Damage

If any error, omission or negligence in your services leads to a third-party suffering from a bodily injury or property damage.

Loss of documents

Loss of Documents

You will be protected in case you end up losing or damaging any documents or data that resulted in some kind of loss to one of your clients.

Legal Costs and Expenses

Legal costs and expenses

You will be protected in case of legal liability for things like payment of defence costs, and legal fees and expenses if a client files a case against you.

Public Relations Expenses

Public Relations Expenses

In case you need the help of a public relations consultant to protect your reputation after a claim, we’ll help with the cost of that too.

What is Not Covered?

Since we at Digit believe in transparency, here are some cases where you won’t be covered.

Any criminal act, fines, and penalties.

Deliberate or intentional acts of negligence and omission.

If the services were rendered while under the influence of intoxicants or narcotics.

Losses due to war, terrorism, and nuclear perils.

Any infringement or misappropriation of patents or trade secrets.

How much does Professional Indemnity insurance cost?

The cost of your Professional Indemnity Insurance premium is based on a number of factors, as the risks faced by different businesses and professionals can vary greatly. Some of the factors that are used to determine the premium are:

  • The type of business or services you provide (for example, a medical surgeon will face a whole lot more risk when it comes to their services than say, an accountant)

  • The policy coverage you opt for

  • Where your business is located

  • The number of employees

  • How many clients there are

  • The past claims made against you or your business

  • Your business’s estimated revenue

Who all need a Professional Indemnity Insurance?

If you or your business could need protection from client claims for financial damages from the professional service that you provide, you might need Professional Indemnity (or professional liability) insurance. For example, if...

You or your business provide advice to your clients

Like Consultants, Contractors, or Counsellors.

You or your business provide other professional services

Such as Accountants, Developers, Wedding planners, or Legal professionals, and Medical professionals.

You provide designs to your clients

 For example, Architects, Designers, or Engineers.

You or your business provide some form of guidance

 This could include Fitness Instructors, or Tutors and Teachers.

How to choose the right Professional Indemnity Insurance?

  • Complete Coverage – Make sure that you look for the professional liability insurance policy that gives you maximum coverage for all the risks to your business and all its activities, based on the specific services or work that you do. 
  • Pick the right Limit of Liability – Try to pick a professional liability insurance that lets you customize your limit of liability, or sum insured based on the nature and size of your business and the number of employees  
  • An easy Claims Process – Since claims are really important, look for an insurance company that has an easy claims process, as it can save you and your business a lot of hassle.
  • Extra service benefits – Lots of insurance companies offer all kinds of other benefits, such as 24X7 customer assistance, easy-to-use mobile apps, and more.
  • Compare different policies – While it’s always great to find ways to save money, sometimes a policy with the lowest premium might not be the best option because it might not give you the right coverage, so compare the features and premiums of different policies to find one for you at an affordable price.   

Common Professional Indemnity Insurance Terms Simplified for You

Occurrence

Any incident, defect, hazard, or negligent act that results in some damages to a person or property.

Negligence

Any reckless or unreasonable action, or a failure to exercise care, that results in damages or losses. For example, a personal trainer doesn’t ask a client about any previous injuries and this results in them injuring themselves during a session. 

Medical Malpractice

This refers to any act or omission by a medical provider, where their services fall below the established standards, and result in injury to or the death of the patient. For example, a doctor misread or ignored laboratory results, leading to a wrong diagnosis, and the patient suffering an injury or some unusual pain and hardship.

Third-Party

A third-party is any person (or entity) who is not the insured party (i.e., you) and the insurer. It also excludes any other person who has any financial interest in your business or who you contract with.

Limit of Liability

This is the maximum amount your insurer will be able to cover for you in case you make a claim. It is similar to a sum insured. 

Deductible

In case of a professional liability insurance, you will have to pay a small amount out of your pocket before the insurer can pay out your claim.

Civil Regulatory Proceedings

When it comes to liability insurance, this refers to the amount that you would be liable to pay for any potential damages in case of a lawsuit.

FAQs about Professional Indemnity Insurance in India