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Professional Indemnity Insurance

Professional Indemnity InsuranceWhat is Professional Indemnity Insurance?

Professional indemnity insurance provides protection or cover against claims brought against the policyholder in situations revolving around professional negligence. Professional indemnity insurance is primarily obtained by business professionals who offer and provide advice to their customers. In a general sense, there are two types of businessmen who purchase professional indemnity insurance: voluntary and involuntary.

The involuntary business or businessman is required to purchase professional indemnity insurance, in accordance with federal or state legislation. These individuals typically belong to accounting or financial services firms, transport industries, information technology firms, consulting businesses, charitable organizations, building professionals or architects.
Medical professionals and legal professionals are examples of individuals who may voluntarily purchase a professional indemnity insurance policy. There are three primary types of professional negligence–negligent error or negligent omission, error or omission and civil liability—and each will be discussed below:

Types of Professional Indemnity Insurance:

Negligent Error or Negligent Omission: This type of professional indemnity insurance protects the policyholder against any loss or circumstances incurred solely as a result of their negligent act, error or omission in carrying out the holder’s everyday business.

This form of professional indemnity insurance is the narrowest form of cover.
Negligence Act, Error or Omission: This form of professional indemnity insurance protects the policyholder by providing coverage against any losses or circumstances arising solely as a result of their negligent actions, errors or omissions in carrying out the policyholder’s business.

Civil Liability: The majority of professional indemnity insurance policies will extend beyond simply the coverage examples offered above to provide indemnity for any civil liability. This form of professional indemnity insurance provides coverage against an assortment of actions, including all libel and slander, as extensions to the specific policy wordings.

Furthermore, civil liability professional indemnity insurance provides coverage in situations where a breach of contract occurred. All civil liability professional indemnity insurance policies are attached with an operative clause, which is both wide and fairly complex. As a result of the operating clause, there is typically an extensive list of exclusions listed under such policies, in order to exclude certain liabilities that are covered elsewhere. If such a list was not attached to this form of professional indemnity insurance, things like the Public Liability and Employers Liability may be overlapped in regards to coverage.