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What is Professional Liability or Indemnity Insurance Policy?
An overview of what is professional liability insurance or indemnity insurance and how it offers protection to the common man.
The best part about insurance is that it offers a huge variety of policies/plans to an individual, ensuring complete financial protection in different situations of life. One such example is the professional liability insurance plan. Here we discuss what it is and how it helps an individual. Read on to learn more.
What is Professional Liability or Indemnity Insurance?
Also known as indemnity insurance, this type of insurance plan is specifically designed to offer financial coverage to individuals against certain professional risks as well as legal costs. For this reason, it is also sometimes referred to as Errors and Omissions (E&O) Insurance. To put it simply, in case any third party suffers any harm, physical injury (even causing death) or property damage on account of a faulty professional service or advice offered by the person insured under the policy, the Professional Liability Insurance plan comes to the rescue.
The most commonly affected individuals in such cases are generally professionals such as doctors, lawyers, chartered accountants, architects, and the like. A number of professional organizations also avail protection under the indemnity insurance cover, such as law firms, hospitals, BPO centers, and more.
On grounds of malpractice, negligent behavior, or unprofessional attitude in delivery of service to a third party, the insured can be legally sued in a court of Indian law. This is when the Professional Liability Insurance offers coverage for any legal expense that may be incurred due to any omissions, negligence, or errors in the service rendered by a professional, directly impacting a third party by way of property damage or physical harm/injury.
3 Features of Professional Liability Insurance
Following are 3 key features of this cover:
- The coverage provided under indemnity insurance is limited to costs arising out of any legal liability on account of malpractice or negligence by a professional while delivering a service or advice due to which a third party had to sustain physical harm or damage to property.
- The policy also provides coverage for expenditure related to defending the insured during a legal court case. The lawyer fee and other legal charges pertaining to the defense of the insured in a court of law in India is chargeable to the sum insured under the indemnity insurance plan.
- Single and group plans are both available under the small business professional liability insurance. Under the group plans, all the members belonging to one particular profession are provided coverage. Depending on the number of members under the group insurance plan, a discount is also offered on the premium payable under the policy.
Eligibility for Professional Liability Insurance
As stated above, this protection cover is specifically meant for professionals involved in rendering services to people of some kind. This would include lawyers, doctors, engineers, architects, counselors, financial advisors, chartered accountants, management consultants, and the like. Their profession involves giving advice or assisting people by way of some professional service.
As is human, sometimes the service delivered by a professional may involve some negligence, omission, error, or even malpractice or unethical/unprofessional behavior. Moreover, on account of any of these, a third-party (recipient of the service) may suffer physical harm or injury, or damage to property (in case of architects).
In such cases, the professionals, who are also the insured under the plan, can be legally sued by the third party. All legal expenses and liabilities can therefore be borne under the Professional Liability or Indemnity Insurance.
Exclusions Under Indemnity Insurance
Now let’s take a quick look at what is not covered under this protection plan:
- Any legal expenses or liabilities borne on account of wrongful detention, false arrest, defamation, and the like
- Liability due to any law violation like fraud, deceit, or any other criminal act
- Liability for health condition caused or associated with AIDS
- Rendering of service under the influence of alcohol or drugs
- Coverage of loss to the insured in terms of market credibility, repute or goodwill
How to Get Professional Liability Insurance?
We discussed above who is eligible to apply for this insurance cover and what all is not included under the plan. Now let’s quickly understand how to file a claim under the Professional Liability Insurance cover plan.
Here are the simple steps required to claim coverage under the policy:
- The insured needs to submit the claim in writing to the insurance company, covering all the required details of the liability borne.
- Along with the claim, the insurer would also require the insured to submit relevant documents such as a written report of the exact incident as it happened and some pictures for proof of damage, loss, or harm caused to the third party.
- Upon verification of the submitted documents and claim report, the insurance company would proceed with processing the claim filed and settle the insurance amount in the name of the insured. Note that the insured would need to pay deductibles to the insurer before receiving the insurance proceeds.
Which Companies Offer Indemnity Insurance?
Considering its dire need in the professional services industry, several leading insurance companies in India are now offering Professional Liability Insurance to customers. A few of the names that are popular in this insurance category include:
- Bajaj Finserv.
- Reliance General Insurance.
- ICICI Lombard.
- New India Insurance.
- United India Insurance Company.
Also Know: What Is GIPSA & How Does It Work?
Bottom Line
Professional Liability or Indemnity Insurance is a boon to small business owners rendering professional services to individuals. Since making errors is only human, there is always the likelihood of a mistake when it comes to delivering a service. In case of any harm caused to the third party on account of the error made by the insured during service delivery, a legal case can be ensued against the latter. The indemnity insurance policy thereby provides protection and financial coverage in such situations.
Found this post informational? Browse PayBima Blogs to read interesting posts related to Health Insurance, Car Insurance, Bike Insurance, Term Life Insurance and Investment section. You can visit PayBima to Buy Insurance Online.
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Life Insurance Glossary A to Z You Should Know
When reading a life insurance policy document, there are several terms that you may not comprehend or know the meaning of. Read on to learn the glossary of commonly used life insurance terms.
A life insurance policy is a very crucial document, defining the financial protection that your beneficiary/loved ones would be entitled to receive in case of your unfortunate demise. Now, this document contains a number of terminologies, not all of which are familiar to a layperson. It is however important to understand the basic essence of some of these terms commonly used in a life insurance policy so that you know what it entails for you and your loved ones in your absence.
To make things simpler for you to understand, we list here a glossary of life insurance terms, most of which are often seen in every policy document.
A-Z Glossary of Life Insurance Terms that You Should Know
Here are some of the most popular and commonly used terms used in life insurance plans. We hope that this glossary will help you understand the life insurance terminologies better and make an informed and educated decision before buying a plan.
- Annuity: It refers to a contract between the insurer and the insured, assuring a regular amount of money to the latter for their entire lifetime.
- Beneficiary: Refers to the person whom the insured has chosen to receive the insurance benefit in case of an untimely and unfortunate demise. The beneficiary’s name is then put in the life insurance policy as well.
- Claim Settlement Ratio: It is one of the most important determining factors before purchasing an insurance plan, particularly term life insurance. The Claim Settlement Ratio or CSR refers to the total number or ratio of claims settled by the insurance company as against the number of claims received or filed by the insured during a given financial year. Note that the higher the CSR of a company, the better its reputation or credibility is in the market.
- Death Benefit: Refers to the amount of money that the insurance company is required to pay to the beneficiary or nominee of the insured at the time of death of the latter, to support the family of the insured financially.
- Extra Life Option: This is an additional benefit offered by some insurance providers where the insured is entitled to receive twice the amount of sum assured mentioned in the policy due to an untimely demise due to accident.
- Free Look Period: This feature is available on all new life insurance plans bought. It is an option given to the new policyholder to return the policy that they have purchased to the insurance company during a specific time period, known as the free look period.
- Group Life Insurance: A type of life insurance plan wherein a single policy provides coverage to a large group of individuals. These kind of plans are mostly offered by employers and organizations to provide coverage benefits to their employees.
- Issue Date: Refers to the exact date when the insurer accepts and approves the application submitted by a prospective policyholder for buying life insurance.
- Joint Life: A type of plan allowing both the partners or spouses to be joint owners and beneficiaries of a life insurance plan. This is done to ensure that both the partners are entitled to receive the insurance proceeds in case of death of any one of them.
- Keyman Insurance: Refers to an insurance policy bought for the key or the most important person in a business organization. In case of small business companies, key person generally refers to the owner, founder, or an employee at an important position in the company. This type of insurance plan is generally purchased to ensure that the key person of the organization is financially covered.
- Life Assured: Refers to the individual who is also the insured under the life insurance plan. Note that life assured may not necessarily imply the policy’s owner.
- Mortality: Refers to the rate of the total number of deaths recorded among a specific number of people in a given period of time.
- Non-Cancellable Policies: Refers to a type of insurance plan that cannot be canceled by the insurer until the time the policyholder keeps paying the premium amount.
- Occupational Hazard: Refers to any dangerous situation in a work environment or job that may increase the likelihood of an accident, illness, disability, or even death of the insured under the plan.
- Premium: Refers to the amount of money that the policyholder is required to pay to the insurance company at regular intervals in order to maintain the insurance plan. This means that in case of non-payment of premium, the insurer has the right to terminate the policy and cancel all benefits derived from it to the policyholder.
- Riders: Refer to the add-on or additional insurance plans purchased over and above the base life insurance policy in order to receive extra coverage or protection. There are a number of different riders that can be bought in addition to the insurance policy purchased to avail various extra benefits.
- Surrender Value: Refers to the amount of money payable to the insured by the insurance company in case the former decides to voluntarily discontinue or terminate the plan for some reason.
- Tax Benefits: Refer to the deductions provided under the Income Tax Act, 1961 to the policyholder for the premium payable under life insurance plans.
- ULIPs: Short for Unit Linked Insurance Plans, referring to a type of financial product provided by a number of insurance companies in India. The primary feature of ULIPs is that they offer the combined advantage of investment as well as insurance to the owners.
- Vesting Age: Refers to the age when the individual is entitled to start receiving pension from the insurance-pension policy of life insurance.
- Whole Life Policy: A type of life insurance plan providing financial protection to the insured for an entire lifetime, thus the name whole life policy.
Read More: Types of Life Insurance Policies in India
Wrapping Up
The terms mentioned in this blog are just some of the many terminologies used by most life insurance companies in India. In case of any doubt, make sure to enquire from your insurer. You can look for the best life insurance policy offered by the Life Insurance Corporation of India (LIC) online and choose the one that ideally meets your financial requirements.
Found this post informational? Browse PayBima Blogs to read interesting posts related to Health Insurance, Car Insurance, Bike Insurance, Term Life Insurance and Investment section. You can visit PayBima to Buy Insurance Online.
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