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Professional Indemnity Insurance (PII) is also referred to as professional liability insurance but mostly known as errors and omissions. It is a type of liability insurance that aids companies that offer professional advice and services and also individuals from paying the whole cost of defending a claim made by a client that is of negligence.
This type of cover is designed to give financial cushion in the case that a person makes a mistake and a client demands a claim. Basically it covers negligence while other policies take care of things like loss of data records, misrepresentation and civil liability. A good example of negligence is when an accountant carelessly stores financial documents and a client sues.
When undertaking partnership or self employing business you are working on ideas that largely affect your client. A person is needed by law to have this cover based on their location of work. It also protects your financial state and work against any scandal that may ruin it. This cover is only given in the case where the policy provider covers you as professional in case of any negligence.
Essentially doctors and lawyers are legally most needed to carry this cover product, but professionals from other relevant fields can gain from this cover policy. Though the premium rates can be high for professionals in risky fields the benefits outweighs the costs. One suit is able to repay itself.
The policies are build on claims made basis that is the policy compensates only for claims made in the policy time. Further, the policy will repay a client from loss made due to negligence, error or omission of a product or service respectively. Claims made arising from incidents before coverage will not be paid.
Cover does not take into consideration criminal cases or legal liability within civil law. Some policies are strictly worded while others are made to achieve least approved words hence easy to make comparison. Others differ in the cover they give. Cover against negligence is mostly restrictive and would refuse to cover non-negligent claim.
Coverage is prolonged as long as the policy giver provides the required products and services within the span applying to the given limitations. Any cancel of policy before effect of the cover is as equal as no cover taken at all. This break in coverage leads to a major loss in all acts done before.
If a gap occurs during coverage, it may lead to cover not being renewed. A number of underwriting carriers will not permit backdate of your cover by professionals when it is almost expiring without a sound reason. Though cases may differ for different carriers and also policies.
Due to many exclusions to liabilities for example public liability and employers liability, professional indemnity insurance does not include defamation, breach of contract or personal damage but can give indemnity for an act of civil liability. It is recommended for firms that sell knowledge or skills. To top it up is that it protects a firm against any future lawsuits made on it.
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