Run For Cover

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A professional mistake or a motor accident has the potential to disorient an otherwise well-planned life. Hence, protecting ourselves against events that may occur due to our profession or activities which we may undertake in our everyday life should be a priority. In this direction, non-life insurers offer cover against liabilities in three broad areas: professional liability, motor third-party liability, and public liability. These policies which need to be renewed every year pay your compensation and any legal fees on your behalf in case of any mishap. Professional and public liability insurance is also available for a specific duration or events. Let’s take a closer look at these policies:

a) Professional Liability Insurance was typically taken by doctors earlier, but is now used by other professionals such as lawyers, chartered accountants, architects, engineers, adventure tour operators, media professionals, and people from many other professions. In fact, in many professions, professional indemnity is mandatory and may or may not be provided by the employer.

This policy covers you against any financial loss because of bodily injury borne by your clients due to your work-related mishaps. For instance, a doctor can be sued for performing an operation, which the client thought was an act of error.  Premiums are usually worked out on the basis of the profession, business turnover and the extent of jurisdiction (India or global) one would want. The turnover helps the insurer decide the risk probability of an individual. A higher turnover would mean more clients and a greater probability of errors and omissions. Hence a higher premium would be charged on such a profile as compared to one with a lower turnover. Indicative premium rates per Rs 1,000 of sum insured for various professionals for a whole year's cover:

An additional premium of Rs 1 per 1,000 may be charged depending on your annual earning. A typical professional liability insurance policy is divided into two categories - Any One Accident (AOA) and Any One Year (AOY). In the AOA category, there is a limit to the amount you can claim from the insurer for each case filed against you. For AOY, all mishaps in a year can be claimed for provided the total amount does not exceed the sum insured.[PAGE BREAK]

This means that if your AOA limit was capped at Rs 8 lakh and AOY limit was capped at Rs 50 lakh, your insurer will pay a maximum of Rs 8 lakh for any one accident subject to a limit of Rs 50 lakh in any one year. This distinction in sub-limits, however, doesn’t apply to third-party liability and public liability policies. (b) A Public Liability Policy protects you against any mishap resulting in injury or death of a third party or damage to the property of a third party. For individuals, public liability comes with householder’s packaged policy as, on a stand-alone basis for individuals, the premium size could be very small, (for an accident occurring in a given year it is around Rs 1 per Rs 1,000 sum insured ) which doesn’t make sense for an insurance company. The concepts of AOA and AOY are applied here, but the limits are more relaxed.

This policy, however, is not much used as chances of a guest filing a case are little. (c) A Third Party Motor Insurance Liability is the first cover that you need to buy even before you take your car out of the showroom. This policy provides cover in case you damage property or cause an accident or loss of life of a third party. The liability for third party bodily injury or death is unlimited as per the statute. When awarding damages, the courts take into consideration the earning capacity and age of the injured/deceased person. But for third party property damage, the maximum liability is Rs 7.50 lakh and the mandatory (minimum) liability is Rs 6,000. This policy too covers the compensation and legal fees and interest on compensation awarded.