When you’re considering insurance policies to protect your small business against any possible claims, it’s important to get familiar with the kinds of policies you might want to purchase.
Imagine, for example, that you’re a catering company owner who has taken out a basic insurance policy. With your general liability insurance policy, you know you can be covered if during the event, one of the guests burns their mouth on a hot menu item. Likewise, if spilled wine ruins an attendee’s angora sweater dress and they name you for the third-party property damage, you will have coverage.
But what if you’ve failed to keep the food kosher, and some of the high-profile guests can’t eat? If your client fails to close a business deal with said guests, they might sue you. Would you be covered in that case?
The answer: only if you have indemnity insurance, also called professional liability insurance.
Professional indemnity insurance is a type of insurance that can help protect you from claims due to error or negligence relating to your business. This guide is designed to explain what it is, and how you can determine if you need this kind of coverage.
Professional indemnity insurance protects you in the event of financial loss by a third party. More specifically, it’s an agreement for one party (in this case, an insurance company) to offer protection to another party (in this case, a small business) if they suffer losses or damages.
How is an indemnity insurance plan different from other insurance policies? It comes down to the difference between general liability insurance and professional liability insurance. In short, an indemnity policy is a synonym for professional liability insurance. Let’s take a look:
The main difference? General liability insurance only applies to third-party claims of bodily injury and property damage. Professional liability insurance can help cover you in case of a wider array of errors or omissions that might land you in civil court.
With Thimble, you can take out both kinds of insurance at an affordable rate, providing better protection against a wide spectrum of liability claims, the kind of stuff that happens every day in small business.
If your business relies on your specialized knowledge, and you provide advice, expertise, or services related to that knowledge, you probably want professional liability insurance in addition to general liability insurance.
Some professions always require indemnity insurance:
In addition, professionals in the following fields often take out this insurance, too:
Long story short, if your clients might accuse you of “failure to perform,” breach of contract, or of any other error or omission, you probably need indemnity insurance, too.
Professional liability insurance is a must-have for many small business owners. So how does it work in practice?
When you take out an indemnity insurance policy with Thimble, you select a policy limit of $1 million or $2 million dollars. This is the amount you are insured for.
When a client files a claim of negligence, errors, or omissions, your indemnity insurance can help to cover the costs of your legal fees and any potential payout to the client up to your policy limits.
It’s important to know, however, that indemnity insurance doesn’t protect you against each and every claim. If you, your employees, or your subcontractors intentionally misled your client, you wouldn’t be covered.
For example, say a hairstylist recommends a specific shampoo to a customer and they turn out to have a severe allergic reaction. If that customer had to skip an important work conference because of it, which negatively affected their career, then having indemnity insurance coverage could be beneficial. However, if that hairstylist had known about this allergy and still recommended it, this would be considered intentionally misleading.
In today’s litigious environment, a civil case can be expensive. Whether you’re an interior designer who delayed a small business’ move-in date or a DJ whose vulgar choices sent potential investors fleeing your client’s dancefloor, you could find yourself responsible for all of the following in the event of a civil case:
Depending on your policy limits, your indemnity policy might help to pay for all of or a portion of these costs.
It’s more affordable than ever with flexible, on-demand coverage from Thimble. Thimble’s General Liability and Professional Liability Insurance policies only work when you do. That means you can select from hourly, daily, or monthly policies.
The total cost of your insurance will be calculated based on your ZIP code, the specifics of your business, and the policy limits you select ($1 million or $2 million). With a $2 million policy limit, you maximize your potential coverage in the face of civil claims.
With Thimble, you can also add as many Additional Insureds as you need to your insurance plan and make changes whenever you like. That way, you’ll know exactly how you’re protected. Thimble puts total control over your insurance back in your hands (literally—we’ve got an app).
Protect your business with an indemnity insurance plan today. Get a free quote in less than 60 seconds, get insured, and get to work.
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Our editorial content is intended for informational purposes only and is not written by a licensed insurance agent. Terms and conditions for rate and coverage may vary by class of business and state.
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