Professional Indemnity Insurance is a form of Liability Insurance. It helps and protects companies against financial claims from their customers and third party claims. The companies can be professional advisors and service providers. The reason for liability may be due to professional negligence, unintentional breach of duty, errors and omissions. Professional Indemnity Insurance is also called Professional Liability Insurance. A civil lawsuit is filed against the company for claiming damages.
Professional indemnity insurance protects against professional negligence made by the company. Complaints are made by dissatisfied customers who have been the victim for poor service/advice made by the company by mistake. This insurance can also protect against defamation or misuse of customer data or unintentional contract breaches or loss of documents or copyright issues or any breach of confidential data.
Here in this article we discuss the importance of the professional indemnity insurance, Significance of Professional Indemnity Insurance in the UAE, how much is the insurance cover required, who are covered in the policy, what claims are covered and what claims are not covered in the insurance policy.
Professional Indemnity Insurance- What you need to know about?
Why is Professional Indemnity Insurance required?
The main reason for Professional Indemnity Insurance is to cover negligence, misrepresentation, violation of fair dealing and good faith and inaccurate advisory services.
The general liability insurance policy will cover physical body injury, damage to property and other injuries. There can be other forms of insurance cover which includes product liability, employers and public insurance. Any harm done to a person or property can be covered by these policies. The general liability insurance does not include or cover negligence or misrepresentation hence professional indemnity insurance is important.
Professional Indemnity Insurance in the UAE
For many business organisations in UAE and in Dubai it is important to have professional indemnity insurance. It is very important for those organisations which provide advisory services for a living.
If a customer alleges that a professional organisation has provided inadequate or inaccurate advice as part of their professional service then the organisation may be required to defend in the court. Based upon the verdict the compensation should be paid by the accused party.
Regardless of the size of the business any claim can be of huge financial expenses. The legal process can be expensive, time consuming and lengthy. If you have professional indemnity insurance you can protect yourself against hefty financial losses.
If you are into a business of providing professional service and handling customers data, working under Non Disclosure Agreement (NDA), if you are responsible for intellectual property in Dubai, UAE then it is required to have Professional Indemnity Insurance.
Providing protection for the customers and giving accurate service is the responsibility of the professional service business. It is not just mandatory for the business to have Professional Indemnity Insurance but also to take adequate measures to protect the quality and accuracy of the service to the clients.
Professional Indemnity Insurance is solely required for legal profession or accountancy professions. Personal Indemnity Insurance is vital for workers in industries such as IT professionals, trainers, consultants, coaches, private tutors and teachers and designers. The decision to take personal indemnity policy may be expensive but many businesses insist that they have adequate cover in the policy.
Irrespective of the nature of business you operate or the industry you have, professional indemnity insurance gives you peace of mind to work confidently.
Since business is operated in a dynamic environment some miscommunications can happen and affect the customer and entrepreneur relationships. This is the reason that you should take professional indemnity insurance.
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How much is the Insurance cover required in the UAE?
The level of insurance required depends on the various factors such as size of the business, business work activities, customers requirements, industry requirements and so on. In some situations the minimum level of cover is specified by the industry. If nothing is specified according to your business requirements then consider protecting your business according to your work project.
Just think of a situation where you are the customer and got severely impacted by the business mistake then what compensation you would expect, according to that make your estimates. Include aspects such as potential fees, loss that customer suffers due to your errors and omissions, consider the high legal expenses and make your estimates.
Corporate Court cases have many trials and judicial proceedings continue for a long period more than a year. You may have to pay legal fees for many years sometimes, so consider all these factors and decide the level of your insurance coverage.
Professional Indemnity Insurance helps you to protect from heavy costs of financial claims. It helps you to focus on your business and gives you peace of mind to work.
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Who is covered under Professional Indemnity Insurance?
Professional Indemnity Insurance covers the services of doctors, lawyers, architects, chartered accountants, engineers, contractors, and other service providers. It includes services offered by the professionals and products sold. The errors made by the professionals during discharging their duties are covered under the policy.
For example: Doctors may be at risk due to negligence, wrong diagnosis or wrong operation. Similarly an engineer may be at risk because of faulty designs and lawyers for wrong advisory services. These professionals can be sued for negligence resulting in court cases which would continue for a long time and also affect their professional careers.
What is covered under Professional Indemnity Insurance?
The coverage of this insurance focuses on financial loss which was caused by error or any omission in the service deed or any product sold. General liability insurance policies do not cover the damages caused by professional financial loss or any professional negligence.
There can be different forms of professional liability insurance which depend on the profession, legal and medical or any service given as the third party. Professional liability insurance is required by law for certain kinds of professional service practices.
However the Professional Indemnity Insurance covers the following:
- Negligent act, errors or omissions doing business.
- Legal expenses incurred during the proceedings
- Legally eligible settlement costs
- Liability from dishonesty of principal or partner
- Defamation expenses
- Trademark violation
- Copyright infringement
- Expenses incurred due to lost data and liability resulting from it.
What is not covered under Professional Indemnity Insurance?
Professional indemnity insurance does not cover the following:
- Criminal prosecution nor any potential liabilities under any contract
- Claims from willful violation of law
- Damages done to own property or injury
- Financial loss out of any act of terrorism
Professional Indemnity Insurance is meant only for civil liability claims. Having an insurance policy covers the risk and professionals can offer services. Without professional indemnity insurance, professionals are exposed to personal and business risk.
Take away
Life is full of risks. Unexpected events can happen at any time and impact your life and business. Cover your risks with the right Professional Indemnity Insurance. The insurance companies provide you the best prices according to your business requirements. They offer unique and personalized services bringing you the premium quality services and affordable premiums that you can pay. Choose the right kind of policy that gives the best possible benefits. Having an insurance policy can give you peace of mind and protect you from financial loss.
About the author
Vinay Kumar Goguru is a finance professional with more than 8 years of diverse experience as a researcher, instructor and Industry work experience with both public and private entities. Prior to MyMoneySouq, he spent 6 years in Berkadia, It's a commercial mortgage banking company. He has a "Doctoral Degree in Commerce" and two master's degrees with a specialization in Finance, one as Master of Commerce and other as Master of Business Administration. He has written several articles on personal finance, published by different International journals. He loves traveling, reading and writing is his passion. He has a dream of writing a book on his favorite finance topics.
