Many business owners around the world understand the importance of having business insurance, but some of them do not know what to look for in an insurance policy. It is important to note that all insurance policies are not the same. Business owners have to check the features and benefits as well as the terms and conditions of a policy before they can commit themselves. Fortunately, they can never go wrong with Smart Professional Indemnity Insurance.
Why Professional Indemnity Insurance is Important
Professional indemnity insurance is important for businesses that offer professional services. This includes consultants, IT professionals, electricians, and other service providers. Professional indemnity insurance is mandatory in certain industries and optional in others. It protects both the policyholder and the client. These policies protect professional service providers from claims of misconduct or professional malpractice, or failure to observe a duty of care in offering a service.
When a client pays for a service, they expect to get exactly what they pay for. Any deviation can lead to an injury lawsuit. For instance, if a dentist, doctor, or nurse causes harm to a patient knowingly or unknowingly, the patient can file an injury lawsuit against them. Similarly, IT consultants, engineers, architects, quantity surveyors and electricians who design faulty systems that cause significant financial losses to the client can be sued in court.
How Indemnity Insurance Protects Business Owners
Since injury lawsuits are usually costly to defend, having insurance is crucial as the insurance company will pay the legal fees incurred while defending the suit. The insurance company will also pay the compensation awarded by the court. This will ensure the professional service provider does not file for bankruptcy or incur huge losses due to injury lawsuits.
Who Needs Professional Indemnity Coverage?
As noted earlier, anyone who offers professional services to the public is exposed to the risk of lawsuits, so they need to be insured against every possible risk. The following is a list of professionals who need this type of cover:
- Estate agents
- Financial advisors
- Recruitment agencies
- IT consultants
Generally, anyone who uses their knowledge to offer services for which they receive payment should have this type of insurance.
Professional Indemnity vs Public Liability Insurance
Many business owners think that public liability insurance is the same as professional indemnity insurance. They are not. While they both protect business owners from the liabilities associated with lawsuits, they differ in several ways. First, professional indemnity insurance is only meant for professional service providers. On the other hand, public liability insurance protects businesses from the risk of lawsuits arising from slip and fall incidents and other similar types of incidents. For instance, a client slipping and falling at the offices of an IT consultant can file an injury lawsuit. In such a case, the public liability insurance policy will offer protection, not the professional indemnity insurance policy.
Benefits of Having Professional Indemnity Coverage
1. Legal Fees
This insurance policy covers all legal fees arising from injury lawsuits filed by clients. The coverage limits are usually specified in the policy document. This means your business can continue running without cash flow problems. Many professionals have had to declare bankruptcy and close shop because of their inability to pay the legal fees associated with defending injury lawsuits.
2. Legal Settlement
The cost of injury lawsuits goes beyond the legal fees. For instance, if you lose the case, the court may award a huge sum to the plaintiff as compensation. The settlement cost may be financially crippling. Fortunately, professional indemnity insurance will pay the settlement or compensation awarded by the court.
3. Reputation Management Costs
In case of libel, slander, or defamation, the policy will pay the full cost of reputation management to restore the plaintiff’s reputation to its normal standing.
Professional indemnity covers injury lawsuits resulting from:
- Professional misconduct including negligent actions and dishonesty of employees
- Breach of fair-trading rules, consumer rights, and competition guidelines
- Intellectual property violations
- Breach of confidentiality, privacy infringement, and privacy-related issues
What to Consider When Buying a Policy
Liability coverage limits are important when comparing insurance policies. You want a policy that offers sufficient liability coverage. Your insurance broker will advise you accordingly regarding coverage limits.
Insurance premiums must be compared when looking for a suitable insurance policy. This is because you want a policy that offers value for money.