Professional indemnity insurance: What purpose does it serve?

Professionals are required to have adequate skill and technical knowledge in their specific area of expertise. They are required to perform services according to professional standards of conduct. Therefore, clients have every right to file lawsuits if the professionals fail to meet the expectations of their customers. Therefore, the professionals who have their own companies need to purchase professional indemnity insurance that provides coverage against any financial losses caused by lawsuits. It is also referred to as professional liability insurance or simply, professional insurance.

Professional indemnity insurance terminology

Professional indemnity insurance usually takes on different names on the basis of the specific profession. As for example, if you are a home inspector or real estate broker, then you can purchase E&O (Errors and Omissions) insurance policy. Similarly, if you are in medical profession, then you are required to have ‘Medical Malpractice’ insurance. Irrespective of the name, the primary purpose of this insurance is to protect against any potential negligence claim.

Purpose of professional liability insurance

You should have professional indemnity insurance if you have your own business. It will cover you against lawsuits due to negligence, misrepresentation or inaccurate advice. Your clients can also take legal help if your company causes any violation of good faith and fair dealing. However, in addition to professional insurance, you should also have business liability insurance, which can provide coverage for financial losses caused by bodily injury or property damage.

Professional indemnity insurance facts

Before buying professional indemnity insurance policies, you should know that most of the companies provide coverage only for those works, which are done during the policy period. Moreover, you can only get coverage for those claims that are filed during your insurance policy period. Therefore, if your policy gets canceled and you do not make any provision for extended the reporting period, then most of the insurance companies stop providing any kind of liability coverage. In addition to this, each and every insurance policy contains exclusions. Therefore, it is important for you to analyze those professional risks, which are most threatening to your business and buy policies that cover them.

Therefore, it is advisable that you clearly discuss your concerns with your insurance agent, who will help you to purchase suitable professional indemnity insurance according to your need and purpose. If you wish, you can also take online help to satisfy your queries regarding professional insurance.