Who Needs Professional Indemnity Insurance
Professional Indemnity Insurance is not mandatory in Malaysia, but it is highly recommended for those in professional services such as lawyers, architects, engineers, surveyors, ICT consultants, estate agents, accountants, and more.
Each insurance company’s Professional Indemnity is different. It is important to choose an insurance consultant with experience in Professional Indemnity Insurance.
Certain professional indemnity policies may be less desirable on the basis of specific terms and conditions. These clauses may exclude or restrict cover for activities.
Professional Indemnity Insurance Meaning
Professional Indemnity or PI Insurance is designed to give the professional person protection against financial loss resulting from liabilities for breach of professional duty by reason of professional negligence, error or omission.
Professional Indemnity indemnifies you against claims by clients or third parties and will cover damages plus legal defence costs of the claim and for costs awarded against them.
Importance of Professional Indemnity Insurance
Even in the best practice, mistakes can happen. We live in a world where the expectation is that someone needs to be held accountable or responsible for project failures, unacceptable delays or another unexpected happening.
It is important that you maintain continuous Professional Indemnity Insurance as the policy is on a ‘claims made’ basis and any gaps in time could result in an exposure.
A professional practice must have a current policy in force when it first receives the notification of a formal claim against it or becomes aware of a circumstance that could give rise to a claim against it.
Continuity of Professional Indemnity Insurance is therefore essential and should be maintained.
Professional Indemnity Insurance Policy Cover
When deciding on the amount of Professional Indemnity cover to have, you should consider the scope of the work you are doing for your clients and the potential financial impact on them should it go wrong. You know your business best and the sort of exposure it faces.
So there is no general rule of thumb for how much cover your business will need.
For the individual or practice, there is also the stress, damage to reputation, and time wasted in defending a long-running claim. A Professional Indemnity policy also provides cover for legal costs and expenses.
This is important because professional liability claims are often complex and time-consuming to handle.
While Professional Indemnity Insurance offers a degree of financial protection, the best protection against these uninsured losses is excellent risk management solutions to minimize the risk of claims in the first instance.
The limit of indemnity is the maximum amount the insurer will pay on the insured’s behalf on any one claim. For an extremely large claim, the amount exceeding the limit of indemnity would be uninsured and to be borne by the insured.
Thus, it is important for the professional service provider to consider their risk of exposure and purchase what is believed to be an appropriate limit of indemnity.