Benefits of PI Policies

• Professional indemnity insurance policies provide several benefits for the insured. When claims are brought against the professionals, the insurers become liable for any damages caused to third parties. All award amounts won in or settled out of court are paid for by the insurance companies up to the policy's coverage limit. However, the insurers also conduct investigations into claims made against the insureds to filter out frivolous and unjustified lawsuits. PI policies also cover the insured's legal costs while in litigation.
  
  

Who Purchases PI Policies

• Professionals who provide a service to others generally purchase PI policies to protect their business and personal assets. Such professionals include lawyers, doctors, chiropractors, accountants, financial advisors and web developers. PI policies are also bought by professionals to protect their employees. While most insurance policies are optional purchases, some PI policies are required by law to be carried by certain professionals to operate their business. An example of this would be a doctor, in a state such as Colorado, who is required to purchase medical malpractice insurance in order to operate his practice.
  
  

What PI Policies Cover

• Professional indemnity insurance policies cover mistakes, errors and omissions committed by the insureds, while they are providing services, which result in harm being done to third parties. These acts also include professionals giving financial and legal advice and recommendations. Many business owners have commercial liability plans that cover similar acts and provide the same benefits as PI policies. However, commercial liability policies do not cover personal negligence, which PI polices do, and can leave professionals unprotected against those claims.
  
  

Types of PI Policies

• There are several types of insurance policies that are considered PI plans. These plans include professional liability, malpractice and errors and omissions (E&O) insurance policies. Malpractice insurance policies typically cover doctors and lawyers, protecting them from financial responsibility for damages they cause to their patients and clients. Professional liability and E&O policies protect professionals working in other fields.
  
  

Pricing Considerations

• There are several factors that insurers consider when determining premium pricing for PI policies. Such factors include the professional's business location, coverage amounts, claims history and work industry. Professionals should also consider adding "run-off" coverage to their policies, which provides protection for several years after their businesses are closed. If not, professionals are open to lawsuits as liability does not expire because they are not operating a business. A third party can bring a lawsuit years later, and a PI policy pays for claims and the insured's legal costs only when it is in effect.