Being a professional or consultant comes with a few must-dos: Getting a proper professional indemnity insurance coverage is the most important one as it provides a shield against the financial blow of unexpected occurrences. It saves yourself from huge financial trouble in the long run.
It is not a legal requirement to have professional indemnity insurance but it does not mean you should not be investing in it. Professional Indemnity insurance provides safety net against contingencies.
Hence, it is a good practice to buy professional indemnity insurance with an optimum level of coverage. Under the provision of Companies Act 2013, it is mandatory for accountancy firms to invest in professional indemnity cover. Various other associated governing body such as The Council of Architecture (COA) advises professionals to maintain a level of professional indemnity insurance cover.
For solicitors, financial adviser, architects, IT Consultants, it is a pre-requisite to purchase this policy as it helps them work diligently with a greater peace of mind. This policy instills a sense of security in all professions. Be it a wedding planner or a fashion designer or a teacher, this policy plays key role in protecting the interest of professionals. Even doctors have to maintain an optimum level of professional indemnity cover to render professional services in reputed hospitals. One can also include add-on covers such as loss of documents, employee dishonesty extension or defamation cover to get full proof solution for any kind of negligence or missteps.
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Architect, CA, or Lawyer work on contract basis so professional indemnity insurance is required on contractual basis majorly and in order to perform in the bidding process of tenders, having errors and omissions cover is a must-have. Reputed clients demand professional indemnity coverage in India as a pre-condition in order to make you legally obliged against negligence or wrongful acts. Professional indemnity insurance is advantageous not only in terms of litigation coverage or settlement cost but it also helps professionals to work with greater confidence as:
- It builds up the reputation
A professional services firm with PI policy is more appealing and accountable to the clients and it adds value to the brand name as well. Reputation is an intangible asset and requires crucial investment to place your professional firm on the top. This policy helps in avoiding the reputational crisis, lawsuits or devastating results and increase your professional brand wealth substantially.
- Safety Net against the financial crisis
This policy alleviates the fear of errors or negligence in rendering professional services. It covers your professional services against legal liabilities, settlement of court judgments, legal costs. This policy restores your former financial position after the loss occurs. It aids in risk management and provides an evergreen value for your business.
Case: An Accountancy firm has not availed professional indemnity insurance policy. Later a claim has been reported because of bookkeeper error. A client has sued the accountancy firm for negligence. The company is liable to pay the compensation amount and in case of court proceedings, has to bear the cost of legal expenses, court settlement etc. Hefty cost of litigation put a financial burden on the firm.
If the firm would have purchased the policy, the insurance company would be the liable entity to pay for legal costs, settlement amount. Some of the insurance companies, if required may organize out-of-court settlement. This policy would have saved the firm from potential financial emergencies.
The professional indemnity policy is your pillar of strength through the dark phase. Generally, professionals do not understand the worth of PI policy and they consider it a cost addition. Debunk this popular belief of cost addition as you don’t know what could happen tomorrow. Professional indemnity insurance is an investment which provides fruitful result in the long run. Having enough funds for an emergency is required to deal with contingencies. Enforce financial soundness and add value to your risk management philosophy by purchasing an optimum level of PI coverage.
Keep Reading : How much Professional Indemnity Cover do I need?