Indemnity insurance is designed to protect against damage claims resulting from negligent advice or recommendations.
Unlike liability claims, this damage is not always immediate, which is why most indemnity policies cover both past and present clients.
Indemnity Insurance: Crucial To Your Business
Counselors and consultants often consider indemnity coverage crucial to their business, although this protection may be recommended for virtually any type of business that provides professional information to their customers.
Indemnity insurance comes into effect when the advice, recommendations, or instructions provided by a professional expert results in damage or loss to their client. Computer consultants are especially prone to indemnity claims, as providing inaccurate advice or instructions can mean the loss of critical data stored on the client computer.
Financial consultants and brokers also face claims when their financial advice results in their clients losing money, while medical professionals may face litigation if their prescribed treatment plans cause further illness, injury, or death.
Indemnity claims can result from more than professional consultants, however, as businesses that recommend products to their customers may face indemnity claims if these products result in damage or loss. This can mean anything from automotive companies recommending a certain service to pet care providers recommending a certain pet shampoo. As the damage caused by these products is not always immediate, indemnity insurance extends to both past and present customers.
Indemnity Insurance: Know What Is What
Indemnity insurance polices are available in New Zealand as either Costs Inclusive Excess or Costs Exclusive Excess. The difference between the terms Inclusive and Exclusive concerns the payment of litigation costs that exceed the coverage limit. Inclusive policies means that the insurance provider will pay any defense costs that exceed the coverage limit, while Exclusive policies require that the insured pay any excessive costs.
Indemnity policies will also include a Retroactive Date to limit coverage to only those claims filed after the set date, as well as a Run-Off Date, to extend coverage for a certain period of time after a business closes or a professional provider retires. Many policies will also include a Jurisdiction Limit on the allowable claims, meaning that coverage will be provided only if they are filed within a certain jurisdiction.
Indemnity insurance is critical for any business that provides professional advice or recommendations to their customers, as damage resulting from this advice may not be covered by General Liability insurance. The costs of indemnity policies can vary according to the selected coverages, with those Inclusive of legal defense costs will often carry a higher premium than those Exclusive of these costs.
The Retroactive and Run-Off Dates are important factors for establishing the exact coverage period, while the Jurisdiction Limit may limit coverage to only a certain area. Insufficient indemnity insurance can be very costly for businesses that provide customer information, and so coverage options and limits should be thoroughly researched before selecting a specific indemnity policy.
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