Why Purchase a Professional Indemnity Insurance Policy

• Purchasing a professional indemnity insurance policy transfers the liability from the applicant to the insurance company. Professional indemnity policies pay for the professionals' legal costs as well as any judgment levied against them up to the coverage limit. Insurers also aid in the defense by conducting their own investigation into any claims made against the insured.
  
  

Types of Policies and What They Cover

• Policies that can be purchased by professionals to protect their business and personal assets include error and omissions, professional liability and medical malpractice insurance plans. Professionals who purchase these types of policies include accountants, financial advisers, doctors, lawyers and web designers. Professional indemnity policies cover acts of negligence, mistakes or errors made by the insured. The difference among the three policies is that malpractice insurance is geared toward lawyers and doctors while errors and omissions and professional liability insurance plans cover professionals in other fields. Employees and staff of the professionals are also covered under a professional indemnity policy.
  
  

Considerations

• Insurers consider several factors when determining whether to issue professional indemnity policies. Such factors include the professional's claim history, business location, coverage amount and work industry. If the professional is accepted but is considered a high risk, the insurance company will charge higher premiums. Also, before the insurer pays claims, the professional must satisfy a deductible.
  
  

Liability Doesn't Expire

• One reason for professionals to purchase professional indemnity policies is that liability never expires and they can be sued years after they are out of business. To protect them in such a case, professionals can add "run-off" coverage to their professional indemnity policies. Run-off coverage protects the insureds for a period of time after they close their businesses.
  
  

Warning

• Professionals whose professional indemnity policies are not updated can have policy values that don't keep pace with their industry's averages. This can be a financial liability if their coverage amounts are too low to pay judgment awards, since the policy holders are responsible for any judgment amount above what their policy covers. Also in certain industries, professionals are required by law to carry a professional indemnity policy. Doctors, for example, must have medical malpractice insurance in Pennsylvania, according to the Pittsburgh Post-Gazette.