In InsuranceSamadhan.com’s A-Z Blog series on Insurance topics, we try to provide all vital information related to the Insurance sector and demystify certain myths related to the sector. In today’s blog, we are sharing detailed information regarding – Indemnity Insurance policy – and everything that one needs to know.
Dr Ashok is a surgeon and had a bad day when a normal piles surgery caused paralysis to the patient. Patient filed a complaint in consumer court which awarded a compensation of Rs 100 lakh in favour of patient.
Luckily, Dr Ashok had a personal Indemnity Insurance which paid the amount to patient thus saving Dr Ashok with such financial damage.
Nikhil was an advocate and was in the panel of a leading Corporate on patents. One brand lost one case on patent after they had spent money on Brand Promotion. Corporate demanded compensation from Nikhil on charges of negligence. Nikhil had an Indemnity Insurance to take care of losses.
As clear from above examples, Indemnity Insurance is an insurance contract where insurer assures to compensate losses of insured party caused due to professional reasons. It protects business owners and professionals who may suffer losses and need cover of professional indemnity. It covers risk of Errors and Omissions and Professional misjudgment.
What is Indemnity Insurance or Professional Liability Insurance?
Indemnity insurance is also known as Professional Liability insurance. Professionals provide various advisory services like medical counselling, expert guidance like legal or technical; such advisory or guidance may go wrong and cause losses to their clients. Many clients file legal suits demanding compensation from Professionals. This is quite common with Doctors where treatment can go wrong, and patients demand compensation.
Indemnity Insurance does not work like third party insurance of General Insurance where Insurer compensates third party loss of property or body damage.
Some professionals who provide public service must take Indemnity Insurance. These professions are Doctors, Advocates, Food Suppliers, Financial Advisors, Tax Consultants, Gym Coach, Beauty and Wellness Provider and many more. These professionals may cause permanent harm and client may seek compensation for inadequate service for which client has paid fees.
A unique feature of the product needs to be understood that is the date of service should be within policy term whereas the loss might occur post the policy term. For example, if a Doctor did surgery in 2019, when the Doctor had an Indemnity Insurance, and client suffered problem in 2020 when the renewed Policy is in force, even then event will be covered under Indemnity insurance.
Types of Indemnity Insurance
Indemnity Insurance has many types like Doctor Professional Indemnity, Business Errors and Omissions, Director Liability etc. Premiums depends on the inclusions in the cover which may include legal Services, Worldwide cover, retro cover, defamation and other such risks. Professionals must ask the insurer all details and decide about suitable Indemnity Insurance.
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