Whole vs Term

As there are so many types of insurance policies available in the market, let’s first define what professional indemnity is before we can further dig in to its advantages and limitations. Professional indemnity insurance (PII) is a liability insurance that protects your business when there is a claim for compensation due to any loss (financial/image damage) as a result of your professional negligence.

Professionals who typically avail of this plan include accountants, surveyors, engineers, solicitors and architects. However, the changed definition and dynamics of professionals calls for a higher demand for PII as the services are now extended to people engaged in other industries. The term professional refers to a skilled human being capable of offering specialized advice and service. Therefore, IT consultants, designers, doctors, artists, photographers, marketing and management consultants are now taking the help of PII cover to protect their professional interest.

Pros of Professional Indemnity Insurance Policies

The professional indemnity insurance can offer you protection (only if the claim is made) in the following situations:

1. If there is any negligence or breach of contract on your part.
2. If your unintentional infringement of intellectual property right causes a damage to the client.
3. Any sort of liable or slander.
4. Loss of the data provided by the client.
5. If any of your employees is found guilty in misappropriation of the clients’ money.

Cons of Professional Indemnity Insurance Policies

1. Professional Indemnity insurance does not offer you coverage against the claims above agreed amount, demand for compensation after the policy tenure (if not renewed) and specific vetoed activities.
2. They do not protect you against any sort of environmental and pollution claims.
3. Some of the insurers also do not offer coverage for overseas work.
4. Another shortcoming of professional indemnity insurance policies are that they are for a specified period only and not for life. You never know when the client will file for compensation. If the client faces any problem after the expiry of the policy and files for compensation, you land in the problematic zone.