Professional Indemnity Insurance, Affordable or Not?

You don’t have to be an accountant or financial broker to need professional liability insurance aka professional indemnity insurance.  It will protect you during civil lawsuits.  You may find that in the course of your normal daily business your general liability (GL) policy lacks sufficient coverage from certain scenarios you thought were covered in your umbrella GL policy. Any failure to perform on your part, error and omission in your product or service, or financial loss caused by your product or service could result in a lawsuit which you must defend.  Are you sure your general liability insurance covers the cost of your defense?

Let’s take a closer look at Professional indemnity insurance (PII) in all its forms, and you can decide if you need it or not.

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Which way is your business headed?

What does Professional Indemnity Insurance cover?

Professional liability insurance (PLI) policies cover professional service providing and consulting businesses and individuals from claims of negligence from their clients for errors and omissions made in connection with their advice.  Professional indemnity insurance may also be called E&O insurance (errors and omissions insurance) for this reason by brokers in the real estate profession and lawyers that must have policies that cover errors in their legal jargon. Due to the length and complexity of the legal paperwork that these experts use daily and the official nature of the paperwork itself any mistake can be financially costly otherwise.

For example, a real estate broker may unwittingly remove a certain important stipulation from a contract for purchasing land.  When a buyer signs the contract and goes through with the deal under the impression that the stipulation is in place by the broker a lawsuit may be inevitable after the fact. Past cases involving a broker unknowingly claiming a property was in a specific school district to a buyer has invoked a lawsuit for which a professional indemnity insurance policy could be of benefit to the broker.

Malpractice insurance, which is another form of professional indemnity insurance, is used by those in the medical profession to keep from bearing the cost and liability of defense actions in lawsuits where damages could be in the millions of dollars. While coverage provided does not include criminal prosecution protection, it does provide doctors, dentists, and other medical professionals with piece of mind when making life or death decisions on a daily basis in the care of individuals. Without medical malpractice insurance it would be impossible for a doctor to stay in business while they defend themselves against lawsuits, and for that reason it is required by law.

How is Professional Indemnity Insurance Different from GL coverage?

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A Good PLI Policy Can Bring You All Smiles

Personal or bodily injury and property damage falls under general liability claims, however many times policy holders find themselves involved in a lawsuit for which none of these exists.   As we discussed above, inaccurate advice or misrepresentation which causes financial harm is not covered under a GL policy.

If a CNC machine manufacturer sells a part which fails without causing property damage or damage to persons the loss of business due to the machine being shut down may be covered by product liability insurance.  However, costs to repair or redesign the product and those claims against the manufacturer for such repair or replacement may need coverage under a separate professional liability insurance policy (PLI).

PII policies are typically written to cover a certain time period so that if anything for example is omitted in the case of a legal professional during a covered time period the professional indemnity policy covers it.

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