Professional Indemnity
Insurance cover explained
If you are in the business
of selling your knowledge as advice or skills,
you should be covered by professional indemnity
insurance, to avoid potential massive damages
and legal costs should you be sued.
If you offer professional services you immediately
attract and owe a duty of care to your clients
who rely upon the professional service or advice
you offer.
Today, clients are much more likely to commence
negligence proceedings when it appears that professional
standards have not been met.
Most professionals hold professional
indemnity cover. If you are a lawyer, accountant
or financial adviser, then you must have professional
indemnity insurance. Professionals such as architects,
consultants, advertising and PR agencies, IT consultants,
surveyors and designers often opt for such cover
as well.
All professional service providers have legal
liabilities to their customers and sometimes third
parties.
What does professional
indemnity insurance cover?
When a claim is made against a professional
for tort or wrongdoing, professional indemnity
insurance cover provides the safety net for the
professional to cover or indemnify himself against
the costs of court action.
PI insurance protects your business
against compensation sought by a client if you
have made mistakes or are found to have been negligent
in some or all of the services that you provide
for them. Professional indemnity insurance will
also cover any legal costs.
The insurer promises to indemnify
the professional against claims by clients or
other persons affected by the professional's advice
and activities. The insurer will provide an indemnity
to professionals for damages which are awarded
against them plus legal costs of employing solicitors
and barristers to defend the claim and for costs
awarded against them to the claimant.
Ensure you are properly
covered
A professional indemnity insurance
claim can often be a made after a long delay between
an event and a subsequent claim, you need to be
covered both at the time of the event and when
the claim is made.
Professional indemnity insurance
is underwritten on a "claims made" basis.
This means that the policy provides cover for
any third party claim first made against the assured
during the currency of the policy whether it occured
before the period or not.. "Claims made"
cover is offered therefore regardless of when
the act, error or omission that initiated the
claim took place. However in practice the
longest risk period is usually 3 years as prescribed
by the time period allowed for cases of tort to
be brought.This means that if you plan to cancel
your policy when you close your business or retire
you may need to arrange "run off" cover for a
period of time afterwards.
Should you change insurers, you
will either need to arrange run-off cover or get
agreement from your new professional indemnity
insurer on a claims made basis to accept new claims
for prior incidents.
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