Professional indemnity insurance, also known as professional liability insurance, is a necessity in this present day corporate jungle. Even the most conscientious and meticulous professionals are prone to lawsuits and claims. Big concrete walls and strong shields are not the best protection against the irate customers or clients, legal representatives, bankers and others involved in the profession or the industry. What can really protect a professional in such a case is the cover provided by professional indemnity insurance. Professionals can protect themselves from any risk associated with their very own acts of negligence, misrepresentation, unfair dealings, errors or omissions while performing their services.
Normally, as long as a lawsuit or claims are within the parameters of the policy, the professional indemnity insurance defends the professional and pays for the claims, settlements and reimbursements. However, this kind of protection does not come without certain downsides. There are certain liability pitfalls that every professional must avoid in order to increase the chances of getting full protection under the policy. At this stage, one might or could not be aware of these pitfalls and this could result in some serious troubles. So, here is a quick lowdown of the possible situations that every professional must avoid in order to enjoy full coverage.
Occurrence or Claims
The liability insurance policies normally fall into two distinct categories – namely, occurrence and claims made. The former is responsible for covering the errors and omissions that might occur during the period of the policy. While, on the other hand, the latter covers the claims made and reported during the period of the policy. As the former comes under the heading of pitfalls, it should be avoided. It can limit the ability of the professional to make claims only while paying the policy premiums. Once the duration of the claim is over, one would not be allowed to make any claims for the incidents happened within the period of the policy.
Understanding the Industry Norms
Every professional liability insurance policy is different from each other. The insurance policies of professional businesses falling under the same industry do have a good number of similarities. If almost every business in the industry follows the norms, then deviating from these patterns could open doors to a number of dangerous consequences. From paying a large amount of money to not having a penny to pay claims, there can be an endless number of pitfalls. Therefore, it is advisable to look through the lawsuits of the profession and follow the norms mentioned therein closely.
Disclosure of Potential Claims While Renewal
During the application or renewal process of the Professional indemnity insurance cover, one must disclose all the potential claims in order to make the risk assessment and premium calculation process easy. Most of the applications want the professionals to disclose all the circumstances that one believes could turn into lawsuits and claims. Any kind of failure to disclose a potential claim can give the insurers a right to withdraw the insurance policy in the future, leaving the professional with no liability coverage. One of the most common pitfalls in such a situation arises when professionals follow the common misconception that disclosure of claims will increase the amount of premium. However, the truth is that disclosing the claims will help the insurers in knowing more about the potential risks, and they would, therefore, be able to formulate the best policies for a professional.
Professional liability insurance can be considered a boon for an independent working professional. If such a policy was not available, the professionals would have to pay all the claims from their own pocket, thereby resulting in huge losses. Therefore, it is essential to avoid the liability pitfalls and have a professional indemnity cover to continue offering professional services with a peaceful mind.