Basic Facts about Professional Indemnity Insurance
December 5, 2016
In case you are accused of providing insufficient designs, services or advice to any of your clients, cover can be provided by the professional indemnity insurance against the legal expenses and costs for defending such claims and for any compensation that is due to be paid to your client for correcting such a mistake.
No matter how experienced your firm is, the probability of you or your team making a mistake cannot be ruled out completely. Professional indemnity insurance policy can cover against different types of scenarios like:
- Libel and defamation
- Committing a mistake while working for your client such as professional negligence
- Breach of confidentiality and breach of copyright, though done unintentionally
- Data or documents loss
- Losing money or good either for that you have a responsibility or for your own
Is professional indemnity policy compulsory?
According to the regulatory requirements of the industry bodies, PI insurance is needed by many industry bodies. Some of them include surveying, engineering and accountancy. Professionals who work on a contractual basis including IT contractors, business consultants and management consultants may definitely require PI insurance so that a contract can be awarded.
Even though you may not be obliged by law to avail PI insurance, if there is not one, you may end up paying several thousands of dollars, as well as legal fees, for defending your claim.
Irrespective of a business size, small or big, if you do not have a PI cover, you may end up having a financial vulnerability when a claim is filed against you. While it is true that many professionals try to provide the best possible services, mistakes cannot be avoided. Moreover, when sufficient coverage is in place, you can feel relaxed that your company has been covered.
Is professional indemnity coverage needed by you?
If you are in the profession of providing service, designs and advice to your clients, a serious consideration should be given for availing professional indemnity policy.
Though most organizations usually have amicable association with their clients, an error in an assignment can alter the working equations overnight. Your client may suffer from a big financial loss after your carelessness and they may ask for compensation in lieu of that. Selecting a professional indemnity coverage limit is based on the circumstances of your firm. When you require PI coverage for a particular contract, it is possible that your client must have agreed to a minimum amount. The same may apply to industry bodies so you should check before getting a cover.