As part of the insurance series at SavvyScot, today we are looking at Professional Indemnity Insurance. Does anyone know what PI insurance is? Something that we should all probably be aware of, especially if anyone runs their own business!
A policy that is purchased to cover professionals from loss due to financial claims made against them is called Professional Indemnity Insurance or PI cover. These policies cover the business for legal assistance and claims coverage as well as acts that will cause harm to any third parties.
When you purchase a professional indemnity insurance policy, you are transferring liability from your business to the insurance company: they will be responsible for fees as well as any compensation up to the amount of coverage purchased. Insurers also assist in the defense by investigating any claims made on their own.
Policy types might include error and omissions, professional liability and medical malpractice, and which type of policy you require will depend on what your business deals with. Accountants, financial advisers, doctors, lawyers and web designers would all benefit from having this type of policy, as it ensures they are covered in any eventuality – after all, compensation claims are on the rise.
The difference between the types of policy is that malpractice is generally aimed at doctors, nurses and other medical professionals, while error and omissions and professional liability is better for other (non-medical) professionals. Employees of the business as well as independent contractors working on behalf of the business will also be covered by the policy.
Insurers take a few factors into consideration when deciding whether to issue a policy. These include claim history, business location and coverage amount required. If you are accepted but considered to be ‘high risk’, your premiums may be higher than average to meet any hypothetical needs.
A good reason to consider professional liability insurance is that liability never runs out. Even if the case happened twenty years ago and you have since retired, you could still be the recipient of a claim filed against you. For protection, you can add ‘run-off’ coverage to your policy which will protect you for a number of years after business closure for whatever reason.