Indemnity Insurance

By: EconomyWatch   Date: 26 May 2010

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Indemnity insurance takes the financial responsibility to make up for any damage or injury that the policyholder might cause to a third party. Legally, an indemnity agreement comprises of a contract in which one party is liable to give compensation to another for any loss incurred during the period of the contract. An individual or a company can get a cash coverage from an insurance company when found at fault. Even the legal expenses are met by the insurance company if the individual or the company gets sued by the other party. Professional indemnity insurance is, however, more common than a personal one

Personal and Professional Indemnity Insurance

  • Personal: The insurance company indemnifies the insured for any loss or damage caused according to the specifics outlined in the indemnity policy. A good example of this policy would be that of a landlord and a tenant, since it can go both ways for them. Tenants usually take the responsibility for any damage caused to the property while they are living on it and can be sued by the property owner in case of damage. However, if the tenant is injured within the property’s premises due to a fault already present in the property and having complained about it to the landlord earlier, the landlord would need to pay for damages. Most companies who insure you for indemnity willnot let you take part in any risky adventure sports, such as bungee jumping or skydiving, before you sign an agreement that does not hold them liable for any injury that you might suffer.

 

  • Professional: This policy protects you against damages caused to your client due to your action, inaction or professional advice. Indemnity insurance is no less than a necessity in certain professions, such as medicine, beauty, law, architecture and accountancy. Therefore, this insurance indemnifies companies against any legal liability due to an error committed by them while performing the services assigned to them. Professional indemnity insurance also provides coverage for the legal expenses incurred in defending yourself in case you get sued.

 

How does Indemnity Insurance function?

With personal indemnity insurance you and your family might be saved from the financial and emotional burden of incurring a huge expense. For professionals, indemnity insurance is even more important because they are subject of growing client expectations. The insurance companies will provide you with professional and financial support in case of a lawsuit, regardless of whether the claim of the other party is justified.

If you are not responsible for the damages caused to the injured party, then the insurance company will help you prove so, while also providing you monetary assistance. You will be given coverage even for the cost incurred in the process of you trying to amend the mistake or if you lose the case. Without personal or professional indemnity insurance you will have to deal with all the charges on your own. Indemnity insurance gives you cover for your finances as well as your reputation.


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