Looking for cover? Find out what the difference is between professional indemnity insurance and liability insurance to save time and ensure you have the right cover.
Many people get confused about public liability insurance and professional indemnity insurance. Since both are designed to protect your business against some form of legal action relating to third-party claims against you or your business, many mistakenly believe they add up to the same product. But they are not the same thing.
Many businesses purchase both kinds of cover for varying business activities or choose the option better suited to their professional services and operations. Both can form a vital part of a company’s or professional’s insurance portfolio across a range of industries. To understand the difference between the two types of insurance cover, let’s look at what each one is and compare the differences.
What is Professional Indemnity Insurance?
Professional Indemnity Insurance is insurance that covers individuals in their professional capacity when claims are made against them. The claims will typically be from unsatisfied customers who feel the individual has been negligent or dishonest in the execution of their duties.
They may feel you have given them inadequate advice, that your designs were flawed, or that your services were executed negligibly and resulted in financial losses. The indemnity cover comes into play when such a person institutes legal action against the insured person. The cover helps pay for legal costs and compensation and settlement amounts.
What is Public Liability Insurance?
Public liability insurance is insurance that covers third-party claims instituted against the insured person or business. The claims covered often include claims for injury, death, and loss to individuals that form part of the general public and their possessions. If a member of the public suffers such loss, injury, or death on your business premises or as a result of the actions of one of the directors, employees, or any other members of the company. Incidents occurring where your business operates can also be included as public liability claims.
Public liability insurance doesn’t usually cover third-party claims where no injury or damage to property occurred. Similar to professional indemnity cover, public liability insurance helps pay for legal costs, settlement amounts, and costs involved with third-party claims.
What’s the Difference Between Professional Indemnity and Public Liability Insurance?
Business owners across a range of industries value both types of cover. The main difference in the cover is what kind of claim it is designed to offer protection against. An indemnity policy is designed for claims due to breaches in professional duties and conduct. It’s often ideal for professionals such as architects, attorneys, lawyers, and medical professionals.
Public liability, however, covers claims relating to injuries and property damage by members of the public for incidents on your property or actions by members of your organisation. These claims can include medical expenses when injurious events occur on your business premises. The claims are based on the general duty of care a business is responsible to undertake.
A public liability policy is important for the type of business where you come into frequent contact with the public. Retail stores, for example, often need this type of cover. Manufacturers usually need this cover and product liability insurance, too. Product liability cover helps with legal expenses when products must be recalled or cause damage and loss due to defective workmanship.
In South Africa, people sometimes call professional indemnity insurance professional liability insurance, since legal liability and third-party claims play into the cover. This terminology can be confusing, and those involved in the insurance industry prefer to speak about professional indemnity insurance to lessen the amount of confusion.
If you want to learn more about what is and isn’t covered by these types of policies, you can look into the public liability cover policy wording and professional indemnity policy. Most often, public liability claims involve tangible property damage and personal injury, while indemnity claims often involve negligent or dishonest performance of professional duties.
What Coverage Do I Need as a Business Professional?
The type of cover you need depends on your professional services and products, your operations, and your risks. If there’s a chance that a member of the public could get hurt through accidental injury on your business premises, public liability cover is essential. If you often advise customers in a professional capacity or if negligence in your professional services towards a client can result in any form of loss, you need indemnity insurance.
Individual business owners who act as service providers often opt for indemnity cover, while large retailers often purchase public liability cover. Many limited companies purchase both products, because they offer services and own properties where members of the public enter. Still uncertain? Fill in our online form, and a top business insurance company will contact you.
You can ask them questions about the cover you’re considering. They can send you the insurance policy wording before you sign, so you can make sure you have adequate cover. In the end, the result should be peace of mind, knowing large claims and legal bills won’t sink your company.
Disclaimer: The information provided is for information purposes only and should not be construed as legal or medical advice. The information provided is correct at the time of publication.
Sources: Aon;
