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What Is Professional Indemnity or Errors And Omissions Insurance (PI / E&O) ? How It can HELP me in professional distress?

Professional Indemnity Insurance is a type of business insurance, typically for individials / organizations that provide consultation or any professional services to its clients.

Professional indemnity insurance covers claims made by the businesses in case their clients have sued them for making them endure any significant financial loss due to their advices and services.

Most organizations decide to take up professional indemnity insurance keeping in mind their own protection against coughing up a large sum of money, in case they have caused their clients a huge loss due to their own mistakes and have to compensate for that amount.

It does not matter if you share a good business relationship or bond with your clients. 

A mistake that may lead to a financial loss will disrupt the peace between you. Therefore, it is very important to take up professional indemnity insurance for the protection.

Professional Indemnity/ Errors  and Omissions Insurance cover provides protection for the company and its subsidiaries for claims brought in respect of negligent acts, errors or omissions in the performance of professional services.

Medico-legal cases are no longer a rarity in India. In fact, they’re piling up faster than you’d imagine. A 2016 study by the India Medical Times shows that there has been a 110% rise in medical negligence cases in India each year. A quick look at the CIA World Factbook reveals that in India, there are 0.73 physicians for every 1,000 people. This increases the chances of medical negligence. The fact is that with increasing awareness of medico-legal cases, patients are quick to file a lawsuit demanding compensation. This makes professional indemnity insurance essential for doctors.

COVERAGE : Professional Liability Insurance Policy covers all the legal liabilities arising out of negligence, omissions, or errors of any professional whilst rendering service that causes damage to the property of third-party or injury to the third-party itself.

EXPENSES INCURRED FOR DEFENCE : Public Liability Insurance also covers all the expenses incurred for defence. This means, all the charges and fees applicable to your defence in the court, is paid off out of your sum insured. However, this feature is limited within the boundaries of India only.

WHO CAN BUY THIS COVER : Management consultants, Chartered Accountants, Financial Accountants, Solicitors, Counsels, Lawyers, Advocates, Interior Decorators, Engineers, Architects, Doctors, other medical practitioners, Medical establishments.

WHEN PIP COVER WILL WORK ? : This insurance policy is based on the claims that are made. It means that the professional indemnity insurance policy will only cover the claims that are made during the tenure of the policy. So, make sure you get your renewals done on time. Also, any financial loss due to a false advice, the negligence, or the faulty analyses will only be covered if those mistakes were made during the tenure of the insurance policy. Claims made before or after the period of the policy will not be covered.

RETRO _ ACTIVE DATE ? : Some insurance companies have a retro - active date. The retro - active date is a period or number of days before the actual or date of inception of the professional indemnity insurance policy. They might cover the claims made during the policy tenure but the event or incident that caused the significant financial loss happened before the period. So, events happened during the retro - active period could be claimed if the claim is made during the tenure of the insurance policy. Mistakes are inevitable can happen anytime in any business. Professional indemnity insurance will be there to protect like by carrying the burden of the monetary compensation that is to be given to the clients by the organization.

PIP - THE PERFECT WALTH MANAGEMENT TOOL : The professional indemnity insurance policy is one of the best risk management tools available for businesses, as there is no better way than having an insurance policy pay off your debts or the money you owe to your client. Negligence and mistakes not only cost you your clients but also cost you a fortune. Professional indemnity insurance or a professional liability insurance policy helps manage your business and losses better without having to be sued or legally accused of major financial losses, which might lead to the fall of your entire business or your client’s entire business.

If you do not have professional indemnity insurance, you would either have to pay an amount equal to your client’s loss from your pockets, which might lead to the fall of the business or make the company bank corrupt or might have to face legal actions taken by your client because of to the mistakes you made.

General Exclusions of Professional Liability Insurance Policy:

  • Any criminal activity, violation of law, and fraud.
  • Any situation that is caused by or associated with AIDS.
  • Nuclear perils and any war activities.
  • The financial loss you bear like loss of goodwill or market.
  • Deliberate or willful non-compliance of the statutory regulations.
  • Deliberate or willful non-compliance of the statutory regulations.
  • Usually, a Liability Insurance Policy covers civil liability claims. In case the claims arise out of any violation of law or any criminal activity, then the General Liability Insurance policy does not provide any coverage.
  • Legal liabilities that arise out of any personal injury like wrongful eviction, defamation, libel, wrongful detention, slander, false arrest, etc.

The policy is meant to pay for defence expenses and damages and includes amounts that the insured is legally required to pay because of judgments, arbitration awards or the like rendered against the insured, or for settlements negotiated in accordance with the coverage afforded by the policy.

CONCLUSION : The professional indemnity insurance protects you against any legal actions or threats, which a client, to whom you have caused a major loss because of your mistakes or ill advices, might press on you. It also saves you from paying a hefty amount of money as compensation to the clients for their losses. The policy also protects you by saving your professional image in public and among other existing and potential clients. Having this policy helps you manage your risks while leaving space for improvement by continuing the consultation and services to keep you in business. Get the professional indemnity or liability insurance and save your business and yourself from the embarrassment of failure due to significant amounts of losses to your clients.

PIP is available upto 1 CRORE SUM INSURED for HOSPITALS, POLY CLINICS and NURSING HOMES

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What is PIP