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Understanding the Basics: Exploring Professional Liability Insurance Coverage

Posted on 20 Aug, 2024
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Professional Liability Insurance (PLI) or Professional Indemnity Insurance (PII) provides peace of mind for professionals in diverse fields, such as medicine, engineering, and architecture, against unforeseen complications related to their profession.

Unexpected difficulties can arise for every professional, including physicians who treat patients, lawyers, consultants who help us advance in our professions, and architects who design our skylines. A disgruntled client might allege a missed deadline, or a dissatisfied customer might claim negligence. These situations, while stressful, need not derail your professional journey. PLI, also known as Errors and Omissions Insurance, covers the financial burden of settlements and legal defence.

Let’s delve into the core concepts of Professional Liability Insurance (PLI), including what it shields you from, its coverage, and the value it provides for your professional practice. You may be a seasoned professional or just starting your career, but understanding the specifics of PLI empowers you to make the right decisions and successfully proceed on your professional path.

Professional Liability Insurance

What is Professional Liability Insurance?

Professional Liability Insurance is a policy created especially to support professionals financially and legally in the event of a legal situation.

For example, medical professionals can take advantage of Professional Liability Insurance coverage if they make an unintentional professional mistake with their patients. It can shield against claims that are a result of unintentional errors and usually covers expenses related to the following circumstances:

  • Legal fees for damages or settlements as decided by a court of law

  • Medical malpractice allegations or legal suits

  • Claims for breach of confidentiality

  • Loss of third-party documents and cost of replacing them

Who Can Benefit from Professional Liability Insurance?

  • A working or practising individual with a professional degree in medicine, engineering, law, accountancy, etc.

  • Architects, real estate agents and brokers, insurance agents, consultants, financial advisors, and other professionals

  • Specialists in their field, like research officials, academics, scientists, and others

  • Individuals associated with an organisation or owning their own business or practice

Professional Liability Insurance Coverage and Exclusions

The following is a list of inclusions and exclusions of a PLI Policy:

Inclusions

  • Legal fees and expenses incurred while investigation under legal liability

  • Representation cost in a court of law

  • Compensation for claims because of death caused by error or bodily harm

  • Omission and negligence while offering professional advice or services

Exclusions

  • Fines and penalties

  • Punitive and exemplary damages

  • Pure financial losses

  • Violation of law or ordinances

  • Criminal acts

  • Professional services under the influence of narcotics and intoxicants

  • Liability due to purely cosmetic procedures (medical)

4 Things to Consider for an All-Inclusive Professional Liability Insurance

The following factors must be considered when looking to purchase a Professional Liability Insurance Policy

Premiums

Professionals should compare insurance policies, their scope of coverage, and premiums before deciding on a PLI. A lower premium may seem lucrative, but it often comes with less coverage. A premium depends upon an individual’s or an organisation/firm’s risk-bearing capacity. Underwriters consider areas of practice, geographical location, billed work, claim history, and several other factors when determining premiums.

Policy Limits and Deductibles

Insurance companies fix the amount they will spend to defend covered claims after all evaluations and checks, known as policy limits. Deductibles and policy limits also depend upon the claim history of the policyholder and the aggregate limit during the policy period. The policy limit is set when you buy the PLI. Always check with your chosen insurer for clarity.

Coverage and Exclusions

Coverage and exclusions are significant because they directly affect your claim. It is crucial to take some time to read the policies of leading insurers and choose a comprehensive Professional Liability Insurance plan.

Company/Organisation Coverage

Several Indian and foreign MNCs, hospital chains, and other organisations offer Professional Liability Insurance to their employees to shield against disputes. In such cases, the organisation pays premiums and operating expenses, handles settlements and verdicts, and more. If you are associated with an organisation, check your company policies about PLI, coverage, and exclusions.

Conclusion

It is important to remind ourselves that we may make mistakes unintentionally, and subsequent claims can have severe repercussions on our professional practice and careers. These also hold the potential for significant financial ruin and reputation. It is advisable to shield yourself against unforeseen risks associated with your field of work. Make sure to research and understand your chosen policy’s terms and conditions so you can focus on what you do best and let your insurer manage the complexities of insurance.

Meaning of Individual Health Insurance?

Individual health insurance offers medical coverage for individuals. This coverage must be acquired separately for each family member or individual, giving greater flexibility in meeting individual health requirements. These policies generally cover emergency hospitalisation expenses, pre- and post-hospitalisation costs, daycare procedures, AYUSH treatments, road ambulance services, organ donor charges, and more.

What is Group Health Insurance

Group health insurance is a policy organisations or associations provide as part of employee benefits. The coverage and premium are determined based on the collective risk of the group members. This uniform coverage is available to all members as long as they remain in the group/organisation. Although the sum insured by this coverage varies across companies, the policy often includes the employee's spouse, kids, and parents. It serves as an incentive to employees.

Additionally, employers can avail themselves of tax benefits on the premiums paid. These plans are purchased by companies to offer to their employees or members, not by individuals. Group members can accept or decline the coverage. In some instances, the cost of the premiums can be shared between the organisation and its employees. In such cases, the employees can also avail of a tax rebate.

Group Health Insurance vs. Individual Health Insurance

Choosing between individual and group health insurance depends on your needs and circumstances.

Prerequisites

The initial criteria for group and individual plans differ significantly. An individual health insurance plan is accessible to anyone over 18, allowing for personal choice. Conversely, group health insurance requires membership in a specific group, or one has to be employed in an organisation.

Sum Insured

Individual health insurance plans typically offer a higher sum insured than group plans. This is because individuals can select add-ons to boost their scope of coverage. Group plans, however, usually have fixed coverage limits set by the organisation or employer. Some insurers do allow riders in a group healthcare plan.

Scope of Coverage

Individual plans generally provide more comprehensive coverage, especially beneficial for those with chronic conditions or needing frequent medical supervision. Conversely, group health insurance may have limited coverage and often does not extend beyond employment, such as in the case of retirement.

Premiums

Individual health insurance premiums are generally higher due to the broader coverage and customisation options. In contrast, group health insurance premiums are lower because the risk is spread between individuals, and employers often bear a major part of the cost. This makes group healthcare plans more accessible for those from lower-income groups.

Pre-Existing Diseases (PED) Coverage

Group health insurance provides immediate coverage for pre-existing conditions from day one. However, individual plans often have a waiting period of 2-3 years for pre-existing illness coverage. 

Renewability

Individual health insurance plans offer lifetime renewability, meaning insurers cannot refuse renewal without a valid reason, such as fraud. Conversely, group health insurance coverage ends when you are no longer part of the group or organisation.

Tax Benefits

Tax benefits for health insurance vary between individual and group plans. Individuals can avail of tax deductions under Section 80D of the Income Tax Act for premiums paid up to INR 25,000 annually (for those aged below 60) and INR 50,000 (for those aged above 60). For group healthcare plans, the tax benefits are typically claimed by the employer. Employees may only benefit from tax deductions if they contribute to the premium payments, such as paying part of the premium or opting for additional coverage or a top-up plan.

Which One is Better?

Group and individual health insurance each have distinct features. A group health insurance plan provided by employers offers basic coverage at lower costs as it covers a large group of employees. However, its advantages are limited and cannot meet individual needs. On the other hand, individual health insurance policies may be customised to meet your own needs, providing more comprehensive and specialised coverage. Relying entirely on group health insurance may provide you with less coverage due to escalating healthcare expenses. Moreover, you will be left without coverage if you get laid off or retire. Hence, even though you may be covered by a group health plan, purchasing an individual healthcare plan is also recommended for more complete financial stability and comprehensive coverage.

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This contains only an indication of the cover offered. For complete details on risk factors, terms, conditions, coverages and exclusions, please read the sales brochure carefully before concluding a sale.ICICI trade logo displayed above belongs to ICICI Bank and is used by ICICI Lombard GIC Ltd. under license and Lombard logo belongs to ICICI Lombard GIC Ltd. ICICI Lombard General Insurance Company Limited, ICICI Lombard House, 414, Veer Savarkar Marg, Prabhadevi, Mumbai – 400025. . IRDA Reg.No.115. Toll Free 1800 2666. Fax No – 022 61961323. CIN (L67200MH2000PLC129408). customersupport@iciclombard.com. www.icicilombard.com. (Group Health Insurance,4016 , ICIHLGP21381V052021)