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PII Insurance – Professional Indemnity Insurance

Humans are bound to make errors but sometimes errors may cost a lot specially in a professional context. If a client suffers any damage or loss due to a service provider’s negligence, he can sue the business or service provider, who is liable to pay for the damage. Good news is that there is insurance cover available for such professional liabilities.

Professional indemnity insurance is a type of insurance that protects business interests of professionals, business owners and organizations. These plans protect the insured against legal claims for neglect, error or omissions, malpractice, misjudgement etc. in professional service. It compensates for the damages, caused to a third party or a client, by the insured while rendering professional services and also legal expenses incurred by the insured.

Who should buy Professional Indemnity Insurance?

All professionals should buy PII plans as a protection against contingencies. Professionals and service providers need this protection to safeguard their career, reputation and business. Add-ons like loss of documents, defamation or employee dishonesty can also be included in these plans. For some professionals it is a requirement to have professional indemnity insurance and for some it may be on contract basis where a client needs the service provider to have a professional indemnity cover, eg. CA, lawyers or architects.

Here is a list of professionals who should invest in a PII.

  • Accountants
  • Architects
  • Doctors
  • Lawyers
  • Solicitors
  • Financial advisors
  • Insurance agents
  • IT consultants
  • Management Consultants
  • Engineers and contractors


How does a Professional Indemnity Insurance Works?

A PII is a type of liability insurance for professionals and service providers. It covers their professional liability towards their clients in case a claim is made against them and pays for indemnity claim and legal expenses. In other words, it’s a policy which works when claims are made. For example, Malpractice insurance is compulsory for medical professionals against claims for mental or physical damage to patients. Similarly,  error and omission insurance is needed for an accountant whose negligence may result in a client paying additional taxes.

The insurance coverage depends upon the agreement between the insurer and insured and it covers only the claims made during the policy tenure. Any claims made before or after the policy are not covered. So, always renew your policy on time. However, PII plans have an option of endorsement wherein the insured gets an extended coverage for any event happening during the policy term even after the policy term is over. Another option is a retroactive date in a PII, which is a past date before the policy start date. It provides coverage for past work or mistakes.

Factors affecting the cost of Professional Indemnity Insurance

 There are a number of factors that decide the cost of premium you pay for PII plans such as;

  • Type of business and its risk factors
  • Size and age of business
  • Location of business
  • Business turnover
  • Policy coverage
  • Retroactive period
  • Number of clients
  • A credit score of the business entity
  • History of legal claims


Benefits of Professional Indemnity Insurance

# Covers Legal Liability

PII covers the entire costs for legal defence on behalf of the insured. It includes compensation and settlement in addition to the legal fees.

# Coverage

It provides complete coverage against the potential risks of a business.

# Customizable

It is customizable as per the requirements of a profession or a business. The nature of every business is different and so are the risks therefore one policy does not suit all.

# Simple

It requires minimum documentation, hence a simple process.

# Flexible

The insured can choose coverage as per his requirement which makes PII flexible. Depending on the size, age and nature of business coverage are decided to suit the requirements of any business owner or service provider.


Availing professional indemnity insurance prepares you for any consequences arising from litigation whether justified or not. An adequate PII will secure your business against indemnity claims. However, in India, it is still a very new concept to file claims against professionals for poor service or negligence.

The general public is not aware of their legal rights and so many professionals or business owners don’t feel the need to invest in PII. Making it a legal requirement for professionals will encourage and help both the service providers and service seekers.  People will be aware of their rights and professionals will work on improving their service out of the fear of being sued. It encourages a system of fair business practices making both parties financially secure.

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