Indemnity Insurance Guide

Indemnity Insurance Guide

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  1. What is Indemnity Insurance?

    Defined as “a security against hurt, loss or damage; exemption from incurred penalties or liabilities” by Merriam-Webster, indemnity is protection against claims brought by clients and customers. Covering negligent acts or omissions, Indemnity Insurance can also cover breach of duty, libel or slander.  Examples of indemnity insurance include professional insurance policies such as errors and omissions insurance, civil liability insurance and malpractice insurance, which indemnify professionals against claims made in the workplace.

    There are varying types of Indemnity Insurance such as mortgage and health care insurance.


    Borrowers often purchase an indemnity plan intended to protect the lender should the mortgagor fail to pay the mortgage loan as agreed. In the case of a default, the insurance company pays the balance of the loan to the loan holder and makes a claim against the borrower for the amount.

    Health Care

    Obtaining private indemnity or fee-for-service insurance is handled individually, through employers, associations, or other groups. Often referred to as a Preferred Provider Plan or PPO when offering a limited choice of providers, these health care policies tend to have deductibles associated. Deductibles require the insured to pay medical fees up to a specified amount before the insurer will pay any remaining charges. There are also co-pays, which require the policyholder to pay some percentage of the bill when receiving services.


    Providing services and advice can be worth millions to clients, but a misjudgment on the part of the professional can have ruinous financial implications. Protecting your business from losses due to lawsuits and terminated contracts is possible with the purchase of Professional Indemnity Insurance.

    Why Purchase Indemnity Insurance?

    Purchasing professional liability coverage expands the coverage of traditional general liability insurance policies, which only respond to bodily injury, property damage, personal injury or advertising injury claim. Professions that center on providing services require extra care to protect them from crippling compensation claims. As a professional, you have the training and experience that clients rely upon. When unexpected losses or costs, termed business injuries, occur due to errors or omissions in the provision of your services, clients are likely to hold you liable. Professional indemnity insurance can protect you and your company from crippling compensation claims. A well-developed Professional Indemnity Insurance policy will protect you from the cost of the compensation claim and assist in covering the costs of defending the claim.

    Do I require Indemnity Insurance?

    Certain professions carry a statutory requirement for Indemnity Insurance such as physicians and attorneys, who are obligated to carry malpractice and professional liability insurance, respectively. Other industries that often carry Indemnity Insurance include:

    • Accounting and Financial Services
    • Architecture
    • Building and Construction Professions
    • Charities and Nonprofits
    • Consulting
    • Home Inspectors
    • Information Technology

    Consultants seeking indemnity insurance should note that most policies are sold on a “claims-made” basis, covering only the time period the policy is in force and for claims made during the same time period. Keeping the policy in place after the contract or engagement is completed is a wise choice. Reading the fine print in contract documents is critical, as clients may require you or your company to carry professional indemnity insurance and you want to be sure you have the limit amount specified.


    Photo: Courtesy Careers-in-Finance

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