Professional Indemnity Insurance in South Africa – Are They the Answers to Your Liability Cover?
One of the areas of greatest confusion is the difference between Professional Indemnity, General Liability and Product Liability Insurance. Professional Indemnity Insurance provides coverage for professionals (corporate or individual) for any negligent act, error or omission alleged to have occurred while in the performance of their professional activities and duties. It differs from General Liability and Product Liability Coverage in that the acts covered are those acts performed by an engineer, architect, doctor or attorney in rendering professional services to their clients. To better understand this coverage we will have a brief discussion below of Product Liability, Professional Indemnity and the application of the latter and how it functions.
A. Product Liability
Product Liability is the legal responsibility of a manufacturer to a consumer of its’ product. Liability arises out of the negligent manufacture of a product including defective or faulty workmanship, materials or components. It is a liability that arises from the failure of a manufacturer to properly manufacture, test or warn about its product and occurs when the product departs in a negligent manner from its intended function.
PI Insurance Explained
Professional indemnity insurance (also referred to as PII, PI, professional insurance, public liability insurance, PLI and errors and omissions insurance) is crucial cover for any party who supplies advice, guidance or professional services. If you work in any professional industry, from creative companies to firms who handle data, insurance is essential, yet it can be tricky to know whether or not this form of cover is necessary to you.
In this article,
we'll be exploring which industries require professional indemnity insurance and why this type of cover is so important to companies across the UK and worldwide.
Who needs professional indemnity insurance?
If you think you need PI, chances are you're right! Essentially, if you work in a line of business where mistakes or misjudgements in your work could affect a client or third party, professional indemnity insurance is a vital form of cover which could protect you from the little errors that life can sometimes throw your way. If you're still not sure, it may be helpful to ask yourself the following questions:
• I.T. companies (from programmers to technical support teams)
• Financial companies (from accountants to bankers)
• Creative businesses (from advertising to marketing to photography companies)
• Architects, travel agents, engineer, estate agents...
This list is not exhaustive by any means. If you're at all unsure please consult our quick 'do I need insurance' checklist above or speak with an insurance expert. If you do need insurance, it is important to make sure you address this need. Without the right protection in place you risk your livelihood and your business. So get cover now!
What Is Professional Indemnity Insurance?
Professional Indemnity Insurance is designed to protect your business against any claims arising from negligence advice or services. It covers for people working for a business that involves risk.
Professional Indemnity Insurance policies are purchased by business owners to protect their companies from financial liability in case of claims of negligence. The individual under this is at the same time provided with assistance by Professional Indemnity Insurance when fighting lawsuits. Professionals like accountants, engineers and architects can choose several types of this insurance plan and make their business well protected.
However a professional can be granted or denied by an insurer upon applying for a Professional Indemnity Insurance for several reasons. These factors may include business locations, claims history, industry and coverage amount. The degree of risk reflected by the premium amount is determined by these factors. The insurance company will raise the premiums if a professional is granted a policy but poses a higher risk than standard applicants.
Professional Indemnity Insurance - What Is It All About?
Professional Indemnity Insurance is an example of very good, quality contractor insurance, and its effects can be felt instantly from its cover. The policy itself protects a contractor should they make a mistake that leads to financial loss to another party. The reason that this would be costly to a contractor is because in these cases the party will no doubt file a negligence claim against the contractor that could then be very expensive. This is where such a policy would be effective as its vital protection would cover a contractor for all costs and fees in this case. In addition, having the insurance will bolster the perception that a contractor is in business on their own account, therefore aiding their IR35 position. Plus it will give clients the reassurance that there are sufficient resources to handle any recourse in the unlikely event of an alleged breach of duty, adding value to any tender.
When looking at all contractor insurances, it becomes clear that Professional Indemnity Insurance really is an essential policy and cannot be overlooked by contractors and freelancers alike. With its many benefits, not only concerning a professional's protection, but also their IR35 related tax status, it is a vital policy and compared to its many advantages, can be purchased easily and cheaply.