Personal Indemnity

How to Insure against Personal Indemnity

How to Insure against Personal Indemnity?

According to the UK government online business portal, Business Link, many professional persons are required by law to carry professional indemnity insurance which is also commonly referred to as personal indemnity insurance.

This is a type of cover that protects you as well as your business against third party claims stating that you, during the course of your business operations, caused them to sustain financial loss.

A loss could be in terms of property damage or personal injury and could amount to a sizeable amount of money. If you are selling skills or knowledge to clients, it may be well worth your while to learn how to insure against personal indemnity.

Who Is Required to Have Personal Indemnity?

In terms of UK law, there are particular professions which are required to carry professional indemnity such as accountants, solicitors, insurance brokers, architects, financial advisers and mortgage intermediaries.

Sometimes regulatory requirements for licensure stipulate that personal indemnity be in force in order to carry out that particular profession in the UK. If you are amongst the professionals who are required to have PI in order to do business in the UK, there could be stiff penalties for lapses in cover and you may even lose your license to do business.

How to Insure against Personal Indemnity

Understanding the Duration of Cover

Unlike many types of insurance, personal indemnity is usually only in force if the policy is considered to be ‘live.’ This is called ‘claims made’ cover and if the policy is cancelled, even losses sustained while it was in force cannot be filed against the policy.

In these circumstances, the claimant would file directly against you or your company as there would be no insurance to file against.

Many people arrange for what is called ‘run-off’ personal indemnity cover for a specific duration after cancelling a policy just in case a claim should be made retroactive to when the cover was live.

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What Personal Indemnity Covers

As mentioned above, personal indemnity insurance covers loss of some type to another party by you or your company whilst in the act of doing business. An example of personal indemnity would be a doctor who misdiagnoses a patient and the patient suffers significant financial loss because of that misdiagnosis. If the patient dies, the family could bring suit against the doctor as well as the hospital or medical clinic where the doctor works. No matter what type of business you are in, there is always a danger that an act or an omission could cause injury or property damage to another and why you should always carry personal indemnity cover.

How Much Does Personal Indemnity Insurance Cost?

Bear in mind that cost is always, always, always associated with the amount of risk involved. Therefore, the first consideration an insurance provider would consider would be how much risk is involved in your profession. For instance, a house painter would carry less risk than a neurosurgeon. Next in line when looking at cost is the amount of cover you carry. A policy with a £50,000 maximum would cost much less than a policy with a £50m limit. Another factor in cost is the amount of excess on the policy. The general rule of thumb on insurance excess can be stated as, the greater the excess on the policy, the lower the premiums will be.

No matter what type of business you are in, it is always advisable to consider carrying personal indemnity even if it is not required by law. It only takes one successful claim being filed against you and you could lose everything you have worked so hard to build. If cost is an issue, compare quotes between several companies and keep a high excess on your policy. However, don’t forego personal indemnity because of cost because this particular cover could stand between you and bankruptcy.

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