n. pl. in·dem·ni·ties
1. Security against damage, loss, or injury.
2. A legal exemption from liability for damages.
3. Compensation for damage, loss, or injury suffered.
Definition from the free dictionary
Are You Prepared For The Worst?
Professional Indemnity Insurance (also called Professional Liability Insurance) in today's business jungle is crucial. We don't live in the dark ages any more, and big walls, deep motes and strong shields won't be much help against lawyers, bankers and irate clients. So then, what can protect us in this day and age against these three 'super powers'? What can cover us in the cases where normal insurance won't, such as:
- Violation of good faith
- Unfair dealing
- Inaccurate advice
- Errors or Omissions
Yes, you guessed it, Professional Indemnity Insurance to the rescue!
Insurance Vs Assurance Vs Bankruptcy
Can you afford bankruptcy? Can you afford to carry on business without the assurance of having insurance protection should the client hit the fan? Professional indemnity insurance will provide assurance that your business will not suffer loss, setback or possible bankruptcy. Assurance can go a long way to increasing confidence; and confidence will increase perseverance, and perseverance will increase reputation, and reputation will increase client trust, and client trust will increase confidence - the full circle of safety and peace of mind!!
So... is it worth the insurance?
What Is Covered...
Professional indemnity insurance essentially covers you should your skills or services, bought by the customer, are thrown back in your face; the side-effects of something hitting a fan! It usually covers the legal costs that may arise from the client filing a lawsuit against you and also for any potential compensation in the event of losing the lawsuit.
...And What Is Not
What catches some off guard is the fact that professional indemnity insurance claims can come some time after you have provided the goods or service to your client, even many years later! When a policy expires they are canceled, and you may not be covered should a claim be made after you have canceled the policy or let it expire. You may be resting in front of your fireplace, enjoying your retirement and dreaming of that boat you have always wanted - then the phone rings and that boat sails off into the sunset without you! It is important, crucial that you keep your policy current for a number of years after you retire.
You will face the same issue if you switch insurers. During the 'in-between' time of changing insurers a customer, who bought a service or good from you while you were with the first insurer, could just make a claim against you - and your new insurance company won't protect you. Your previous insurance company won't protect you either, as your cover will have been canceled. Be mindful of this when switching insurance companies and ask the new insurer what provisions they have in the event of this unfortunate scenario happening.
Who Needs Professional Indemnity Insurance?
Traditionally, the term defines itself in 'Professional'; those considered to be the 'men in the white coats', such as doctors, lawyers, accountants and engineers. In more recent times the term 'Professional' has broadened to include many other industries, including education workers, health workers and consultants, architects and designers and real estate agents.
Certain professions are required to have professional indemnity insurance (PII). These include doctors, lawyers, insurance brokers, some contractors and some accountants. The need or requirement for PII may very widely from country to country.