Professional Indemnity Insurance

Here’s How to Keep Your Personal Finances Safe from Professional Mishaps


Professionals like doctors, engineers, architects, interior decorators and legal consultants or lawyers, chartered accountants and management consultants are looked up for their honest and dedicated service for their clients. Certain professions related to medical and law are highly respected in our country. Doctors are considered capable of saving lives in the most hazardous situations. Engineers, architects and interior decorators lay out their imaginative designs and ensure a sophisticated life for people. Similarly, lawyers fight for their clients and save them from punishment that may take up a chunk of people’s life or savings.

But, there are two sides to the same coin. Even though all these professional services are highly respected, there may be a time when these professionals may commit an error knowingly or unknowingly in their professional position. After all, no one can be 100% perfect in his or her job. There may be times when errors might be committed in professional position giving rise to unexpected civil liability towards the third-party. Such professional errors can cost a huge burden on the life and savings of their clients.

Take the recent case of the error committed by doctors in the Fortis Hospital who committed the surgery on the wrong leg of the patient. Even though these staffers were suspended in the said case, taking into account the gravity of the error, such cases do happen even in the medical field. According to a recently published study, legal proceedings accusing doctors of negligence have seen a rise of 400% in the Supreme Court. Although, only about 10%- 15% of the cases have seen doctors being found guilty, the remaining 85% medicos had to incur the cost of defending themselves.

In some cases, a doctor is sued even for a minor error. It may be that the legal liability may require him to pay a huge amount of money which he is unable to afford. He may have to part with his personal assets in such a case. There are also cases in which the doctor or the staffers are held responsible for the death of the patient. Similar cases can result in other professions like the dispute of a lawyer with his client on fees, the difference in the output of the work assured by an interior designer, any loss that the client may have suffered due to improper advice by a management consultant etc. The penalty in case of a professional mistake can be sometimes exorbitant. It may render the concerned professional helpless in the absence of an insurance policy. He may have to pay the compensation by selling off his valuable personal assets, part with his savings or terminating his services as he may not be left with suitable financial backup to run it and lose trust of his clients as well.

To protect themselves from such third-party liability, professionals can opt for the professional indemnity insurance ,also called as Errors & Omissions.

Indemnity Insurance policy covers the claim settlement out of court, compensation, court fees and other expenses arising due to any kind of error done in the professional position. It covers the insured for any error that may not involve wilful neglect and is caused by unplanned errors and omissions.

The limit of indemnity or the sum insured in this policy is fixed as a ratio between per accident and per policy period which is called Any One Accident (AOA) limit and Any One Year (AOY) limit respectively. In general cases, the Any One Accident limit is restricted to 25% of the Any One Year Limit. This is also available as a group policy which can be availed by hospitals, nursing homes, management agencies for its entire practicing staff with discounts in the premium.

Extensions can be purchased to cover overseas litigation filed by foreign clients and customers. An emergency cover can be purchased for such cases that will provide the money to you on a short notice. There is also a provision for claims in the retroactive period. This means that if a certain claim is made in the current renewed policy period due to an error that was committed in the earlier period, such a claim will be payable.

The insurance policy keeps the personal finances of a professional safe from mishaps. It is a significant policy that needs to be availed by professionals as it safeguards them from effects of their unplanned errors that may undermine their reputation, force them to discontinue their services or simply force them to part with their personal assets.


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