Professional Indemnity (PI) Insurance is written on a ‘claims made basis and is distinct from other classes of PI insurance, written on a ‘claims occurring basis. Therefore, the PI policy in effect at the time of the claim will apply regardless of when the mistake or error happened. (In most liability policies, the rights of the insured are determined by the policy period when the incident occurred, regardless of when the claim was made.)
A PI policy stops providing coverage once a professional (or a firm) ceases to trade. Therefore, they must cover for any errors that may have been made but not yet become claims. PI insurance on past work is called a Run-off policy. Professionals and the type of work they do tend to differ in their length of ‘run-off’ purchases.
What kind of coverage is available?
Your provider determines this. The following are some benefits of professional indemnity or PI insurance:
- Defending costs (legal fees are expensive)
- Infringement of intellectual property rights (infringement of trade names, trademarks, domain names, logos, etc.)
- You make errors in your work because of negligence (mistakes).
- If a client refuses to pay any or all of your invoice, the insurer may cover your mitigation costs.
- Violation of contract
Under such claims, which entities are covered?
- Legal entities and their subsidiaries;
- Previous and current principals, partners, or directors;
- Former or current employees;
- Anyone related to the former or acting within the scope of the latter’s duties.
Professional liability insurance benefits
- Provides coverage for legal liability
Insurance covers the full cost of legal defense on behalf of the insured. As well as legal fees, it also covers compensation and settlement.
The pi insurance covers the entire range of risks a business may face.
Depending on the needs of a profession or business, it can be tailored. Businesses are unique, and so are their risk profiles; therefore, one policy does not apply to every business.
The process is simple as it requires minimal documentation.
It makes PII flexible since an insured can select coverage based on his individual needs. Business owners, service providers, and pi insurance companies have access to different types of coverage, depending on the size, age, and nature of their businesses.
Professional Indemnity Insurance: Factors affecting the premium
When it comes to PII insurance, there are several factors that determine the premiums you pay, such as:
- Factors affecting the risk of a particular business
- An overview of the business’s size and age
- Business address
- Turnover of a business
- Coverage of policies
- Retrospective period
- How many clients there are
- It is an assessment of the creditworthiness of a company
- Legal claims history
If you have PI insurance, you are prepared for liability consequences, regardless of whether they are justified. The right PII will protect your business from indemnification claims. However, filing a claim against a professional for negligence or poor service is still a new concept in India.
Service providers and consumers will be encouraged and helped if it becomes a legal requirement for professionals. Because professionals fear being sued, they will strive to improve their services due to being aware of their rights. The system encourages fair business practices, resulting in financial security for both parties.