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What is Professional Indemnity Insurance?
Professional indemnity insurance is insurance that protects you and your business if someone claims against you for matters related to your profession, such as advice or services you provide. If your professional advice leads to harm, loss, or damages to a third party, professional indemnity insurance is designed to cover you.
Everything You Need to Know About Professional Indemnity Insurance
Sometimes third parties may feel the service the insured provided was lacking, negligent, or poor in quality and resulted in loss or damages. Clients or customers can then institute claims against the insured for such losses, whether financial, physical, or emotional. The process of dealing with claims can be lengthy and costly. Good professional indemnity insurance policies will include cover for legal costs and settlement amounts.
Do I Need Professional Indemnity?
Professional indemnity insurance is a form of liability insurance designed to cover risks related to specialised industries and situations. If you are working in an industry where you provide a professional service to clients and customers or where you offer advice in your professional capacity, you may need professional indemnity insurance. In some instances, business partners, sponsors, or significant clients will insist on your taking out a professional indemnity insurance policy. In other cases, you are obliged to get this type of insurance by governing bodies.
Up to 75% of small business owners admit they stress about making mistakes that cost their customers, whether that’s client project mishaps or giving the wrong advice. To assess whether you need professional indemnity insurance, ask yourself the following regarding your business or profession:
1. Do I provide an expert service?
Professions would include a broad spectrum, from architects to technical contractors and designers. If your unique profession includes calculations, plans, and designs that, if not done well, can cause loss and damage to your clients, this includes you and your business.
2. Do I often work with client data and intellectual property?
This would include IT professionals like programmers, designers, or even data management experts.
3. Do I offer professional advice or consultancy?
This can include legal firms, marketing consultants, private tutors, fitness instructors, recruitment agencies, and more.
4. Do my clients insist on me or my business having professional indemnity insurance?
In some cases where clients undertake large projects and contract your services, they will insist on your having professional indemnity insurance.
5. Is there a professional or governing body that requires me to have professional indemnity insurance?
In South Africa, licensed medical practitioners are obliged to obtain professional indemnity insurance, also referred to as medical malpractice insurance. Other industry associations and professional bodies may require the same.
Do I Need Professional Indemnity Insurance as a Sole Trader?
If your trade is to provide a service or provide advice to clients then it is worth considering getting professional indemnity insurance. It may benefit you more than most, because compensation for claims and the legal costs can greatly impact your bottom line. Give yourself peace of mind with professional indemnity insurance that protects you when claims are brought against you, whether misconstrued or valid. Tutors, consultants, trainers, teachers, therapists, web designers, agents, and professional contractors who operate as sole proprietors can all benefit from having professional indemnity insurance.
What Does Professional Indemnity Insurance Cover?
If your client loses money or sustains damage because of the negligence or malpractice of your business or yourself, the resulting legal costs, compensatory payments, and settlements could be covered by your professional indemnity insurance plan. Each insurance plan differs, and depending on your provider, there may be situations that aren’t covered. Before purchasing a professional indemnity insurance policy, find out whether the plan covers eventualities you are at risk for.
Mistakes such as defamation, loss of important documentation, employee dishonesty, breach of confidentiality, and poor work quality can be covered. Whether the claims are fair or not, they will cost you or your company money to resolve. This is the financial risk your insurance plan can protect you from.
What Kinds of Indemnity Insurance are Available in South Africa?
Although many insurance providers offer clients general professional indemnity insurance, you could also get a policy designed to cater to the risks in your specific industry. These different types of insurance can help mitigate risks unique to your profession.
Indemnity Cover for Financial Services Providers
You can get indemnity insurance designed for financial services providers, an industry that has generated more professional indemnity claims than any other in recent years. Indemnity cover for financial advisors can include cover for legal defence costs, loss of documents, staff dishonesty, computer crime, and more. Exclusions may apply, such as defamation, claims preparation, and fines or penalties.
Indemnity Cover for Lawyers
Also called legal professionals indemnity cover, this type of indemnity insurance covers costs as a result of the legal services rendered. Acts of a criminal nature may not be included in indemnity cover and other exclusions may apply. Situations that are covered should be detailed in the policy, so be sure to read through it before signing. In South Africa, newly qualified lawyers are required to obtain a professional indemnity policy.
Indemnity Cover for Medical Practitioners
The most discussed form of professional indemnity insurance is insurance for medical practitioners. Also called health professionals indemnity or medical malpractice insurance, this type of insurance is invaluable for licensed medical practitioners in South Africa. The claims landscape for medical professionals is considered aggressive, and indemnity costs are rising.
DISCLAIMER: The information provided in this article is meant for informational purposes only and should not be construed as legal, medical, or financial advice. Facts stated in this article are correct at the time it was published.
Sources: axa; fanews; aon; pps;