Page 6 - Life Insurance Today February 2018

during the policy period by reason of any covered error, What is professional indemnity cover?
omission or negligent act committed in the conduct of the This policy is meant for professionals to cover liability
insured's professional business during the policy period. falling on them as a result of errors and omissions
Claims which may relate to incidents occurring before the committed by them whilst rendering professional service.
coverage may also be covered, means claims made during
The policy offers a benefit of Retroactive period on
the policy period but which relate to an incident after the
continuous renewal of policy whereby claims reported in
retroactive date.
subsequent renewal but pertaining to earlier period after
first inception of the policy, also become payable.
Some professions entail a risk which can lead to a big
liability if something goes wrong. This is where a
Group policies can also be issued covering members of one
professional indemnity cover can help. People act on
profession. Group discount in premium is available
recommendations of professionals. Hence, if a professional depending upon the number of members covered. The
makes a mistake, the person he has advised will be policy covers all sums which the insured professional
impacted. The public is more aware of their rights and the
becomes legally liable to pay as damages to third party in
duties of professionals and know that they will be heard respect of any error and/or omission on his/her part
in the court of law if they are wronged. committed whilst rendering professional service.

The judicial system is also more empathic to the consumer. Legal cost and expenses incurred in defence of the case,
This definitely improves the accountability of professionals. with the prior consent of the insurance company, are also
Professional indemnity cover takes care of the financial payable, subject to the overall limit of indemnity selected.
liability claim raised by the consumer. The professonals Only civil liability claims are covered. Any liability arising
should take care that the sum assured is not very small. It out of any criminal act or act committed in violation of any
should be renewed regularly and that one is covered both law or ordinance is not covered. In professional liability
at the time of the event and when the claim is made and covers, the sum insured is known as the 'limit of liability.
is to be paid. A sum insured is quantifiable. If a building is worth Rs 100
crore, it needs a cover for a similar amount. But in
If one plans to change the insurer, then events of the past professional indemnity, the claim amount is unknown.
should be taken into consideration. The cover is not limited
to consultancy. It includes educational institutes, art So, insurers set a limit to liability, that is, the extent to
valuers, auctioneers, tour operators and staffing which they will bear the loss, the balance will have to be
companies as well. Even chartered accountants, company borne by the professional. The basic rate for a professional
secretaries, public relations professionals, management indemnity policy ranges from 0.30% to 1% of the amount
consultants and insurance brokers can buy this policy. insured. Various professionals can avail of this policy. The
More and more professions are coming under this ambit premium depends on factors such as profession,
because newer jobs are getting created which are experience, income, limits, jurisdiction and claim
consultancies based. experience. It does not cover professionals from the
financial services industry.
Also, due to increasing education, awareness levels, and
huge sums spent by individuals in getting these services, Who can take the policy?
they have started questioning these professionals if the The cover, in fact, is needed as the insured may not be able
services are found faulty, incorrect and not up to the mark. to bear the loss if a claim is brought against him/his
On the back of this, the policies sold under this segment company, as also to comply with contractual obligations
have seen a good 40 to 45 per cent jump. Since clients act and sometimes with statutory mandates. For individual
on the advice and recommendations of such professionals, professionals, having this policy can ensure their personal
the latter always face a risk of getting sued. The cover will as well as professional survival should they have to pay a
pay legal cost to compensate the client, as decided by a claim. The policy is meant for following group of
court. professionals:-

“Everything you want is out there waiting for you to ask. Everything you want also wants you. But you have to take action to get it.”

6 February 2018 Life Insurance Today

Sashi Publications Pvt Ltd Call 8443808873/ 8232083010