Page 8 - Life Insurance Today February 2018

b. 1:2
c. 1:3
d. 1:4

The AOA limit, which is the maximum
amount payable for each accident,
should be fixed taking into account the
nature of activity of the insured and the
maximum number of people who could
be affected and maximum property
damage that could occur, in the worst
possible accident. In the case of
Professional Indemnity policy issued to
engineers, architects, interior decorators,
lawyers, advocates, solicitors, counsels,
chartered accountants, financial accountants and
Usually the professional indemnity insurance provides management consultants, the Any One Accident (AOA)
cover to the extent of financial damage for loss caused to
limit is restricted to 25% of the Any One Year (AOY) limit.
victim which is not a result of wilful neglect. This is due
to unintentional errors and omissions by professionals and Whatever be the case, the sum insured should be chosen
insured partners. The scope of cover, however, varies with in a manner that it covers any legal obligation that the
each profession. For instance, registered medical insured may face at any given point of time based on his
practitioners such as physicians, surgeons, cardiologists
and pathologists as well as medical establishments are contract size, clientele spread, and contractual features
protected against legal liability claims made by any of their with the clients. The adequacy of sum insured and the
patients that may be based on bodily injuries and/or death. coverage with extensions opted are the most important
The policy also pays for the defence cost incurred in factors to be borne in mind while taking the cove. Another
defending the case. And they can insure not only important aspect to bear in mind is that since there can
themselves, but also other partner or consulting doctors often be a long delay between an event and a subsequent
as well as employed assistants. claim, one needs to be covered both at the time of the
event and when the claim is made. This means that if
Professions like accountancy, law and medical are someone plans to cancel his policy when he closes his
considered the riskiest. This is because clients are aware business or retires, he may need to arrange 'run off' cover
of the increasing fraudulent practices that take place in for a period of time afterwards.
these professions. The premiums are the most expensive
here, usually, more than one per cent of the sum insured. How losses are indemnified?
For instance, to cover a doctor for Rs 50 lakh, he would
The term "liability" means responsibility and "legal
have to shell out Rs 50,000 as premium. For less riskier
liability" means responsibilities which can be enforced by
professions, the premium rate could vary in the range of
0.30 to one per cent of the sum insured. law. Legal Liability may be classified into Criminal Liability
and Civil Liability. Only Civil Liability claims are payable.
How to select the sum insured? Civil Liability claims will arise if there is prima facie
evidence of negligence by the insured resulting in injury
In Professional Indemnity Policy, the sum insured is or death to any third party or resulting in damage to
referred to as Limit of Indemnity. This limit is fixed per property belonging to a person other than insured.
accident and per policy period which is called Any One
Negligence will be proved only when following conditions
Accident (AOA) limit and Any One Year (AOY) limit
respectively. The ratio of AOA limit to AOY limit can be are satisfied:
chosen from the following: 1. Existence of duty of care
a. 1:1 2. Breach of this duty

8 February 2018 Life Insurance Today

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