In-Depth Guide to Professional Indemnity Insurance

If you sell advice or design for a living, mistakes can cost money. Professional indemnity insurance is the cover that steps in when a client says your work caused them a loss. You may also hear professional liability insurance and errors and omissions (E&O) insurance—different names for the same idea in India. These policies protect you from claims linked to your services or advice, not from slips and falls at your office. That last part is the job of general liability insurance. General liability focuses on bodily injury and property damage. Professional indemnity insurance focuses on financial loss caused by an error, omission, or bad advice.

What Professional Indemnity Insurance Covers

A good professional indemnity insurance policy in India usually covers:

• Legal defence costs. Lawyer fees, expert fees, and court costs when a client alleges negligence in your professional work. Most Indian policies are claims-made, so cover triggers when the claim is made and reported during the policy period.
• Damages or settlements. Money you must pay the client after a court order or a settlement that your insurer agrees to.
• Useful add-ons (check your schedule): loss of documents, breach of confidentiality, and libel or slander (defamation). Some policies also add limited cover for unintentional IP infringement. These extras are common in Indian wordings but must be listed in your policy.‍
  
  

Tip: Read the policy wording and schedule, not only the brochure. The add-ons vary by insurer.

Major Exclusions In Professional Indemnity Insurance

Expect most policies to exclude the items below (wordings vary, so always check your copy):

• Fraud, criminal acts, or wilful breach of law
  
  
• Pure contractual guarantees beyond your normal legal duty (penalties, liquidated damages)
  
  
• War, nuclear risks, often terrorism
  
  
• Pollution and asbestos exposures
  
  
• Loss of goodwill, loss of market or reputation without proven negligence
  
  
• IP infringement unless the policy adds it back
  
  
• Claims by your own employees (employer’s liability)
  
  
• Bodily injury or property damage not arising from your advice or design (that belongs under general liability)
  
  

Missed deadlines or cost overruns with no negligence proven These themes appear again and again in Indian PI wordings and insurer summaries.

Who Needs Professional Indemnity Insurance In India

Mandatory or regulator-linked

• ‍Insurance brokers and some insurance intermediaries. IRDAI requires brokers to buy and maintain professional indemnity insurance. Minimum limits are tied to brokerage income under Regulation 24 of the Insurance Brokers Regulations, 2018.
• Architects and allied design professionals in many public or enterprise tenders. Tender documents often demand professional indemnity insurance as a condition to bid.

Examples: A broker places a wrong cover; the client sues for the loss. An architect’s design error forces rework; the client claims the extra cost. PI pays defence costs, and if you’re liable, the damages—up to the policy limit.

Highly recommended

• ‍Law firms, chartered accountants, tax advisors, company secretaries. A missed filing or bad advice can create pure financial loss. (ICAI runs a PI program for members—useful proof of need.)
• Doctors and healthcare professionals. Medical negligence claims are now common; medical indemnity is standard and often required by hospitals.
• IT and software firms, consultants, design and advertising agencies, project and interior consultants, manpower consultants. A buggy release, wrong spec, or misleading claim can derail a client’s launch. Professional indemnity insurance is built for these risks.

How Professional Indemnity Insurance Works

Scenario 1 — Software bug:
Your update corrupts a client’s orders. They send a legal notice for ₹75 lakh. You notify the insurer at once. The insurer appoints a law firm, investigates, and may try to settle. Covered defence costs and any settlement or judgment are paid up to your limit, after your deductible.

Scenario 2 — Tax error:
An accountant gives wrong GST advice. The client pays interest and penalties and sues. If the error happened after your retroactive date, and the claim is made and reported during the policy term, professional indemnity insurance responds.

Key Policy Concepts You Must Get Right

Claims-made basis

PI is almost always claims-made in India. The policy covers claims made against you and reported to the insurer during the policy period (or an allowed reporting window), not when the work happened. This is the single biggest difference from “occurrence” policies.

Retroactive date

The retroactive date is the start line for your past work. Acts before this date are not covered. Keep the same retro date when you switch insurers and avoid gaps at renewal. Losing your retro date can wipe out cover for years of prior work.

Run-off cover or tail cover

Run-off (or extended reporting period) lets you report new claims after the policy ends for work done earlier. It is vital if you retire, close, or switch insurers. Many markets offer tails from months to several years; pick a period that matches how long claims can surface in your field.

Gaps in coverage

If you forget to renew and a claim arrives tomorrow for last year’s job, your professional indemnity insurance often cannot respond. Avoid lapses, or buy an extended reporting period when you exit.

Policy limits and deductibles

You will see two limits: Any One Accident (AOA) and Aggregate for the Year (AOY). The deductible (excess) is what you pay before the policy responds. Some regulators or tenders set minimum limits, so check those too.

Defence costs inside or outside limits

Many Indian policies put defence costs inside the limit (they reduce the amount left to settle). If you can, look for defence outside limits or buy a higher limit to allow for legal spend. Some forms also offer first-rupee defence (the insurer funds defence from day one; the deductible applies only if there’s a payout). Check your wording.

Professional Indemnity Insurance Versus Other Covers

• Professional indemnity insurance: covers financial loss from your advice or service errors, plus defence costs.
  
  
• General liability: covers bodily injury and property damage (for example, a visitor slips, your equipment damages a client site).
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• Health or life plans: protect people, not your professional work; they do not replace PI.

How To Choose The Right Professional Indemnity Insurance

1. Pick the right limit. Think about deal size, worst-case rework, and contract terms. Some bodies and tenders demand minimum limits—meet or exceed them.
2. Choose the add-ons you need. For many Indian firms that means loss of documents, confidentiality breach, defamation, and sometimes unintentional IP.
3. Protect your retro date. Keep continuous cover when you switch insurers so prior acts stay protected.
4. Check how defence costs work. If costs are inside the limit, consider buying a higher limit. If you can get defence outside limits, even better.
5. Ask about claims handling. Panel law firms, response SLAs, and settlement authority matter when a notice lands.
   
   
6. Look past the premium. Better wordings and faster defence save more than a small discount.
   
   

Fun fact: In many Indian PI policies, limits are shown as AOA/AOY (per-claim/annual). It looks technical but it simply splits how much is available for one claim versus all claims in the year.

How to Buy Professional Indemnity Insurance in India

Buying professional indemnity insurance is easier when you follow a simple path. Start by mapping your risk, then choose a limit, lock your retroactive date, add the right extensions, and check how claims will be handled. The steps below keep it practical and India-specific.

1) Map your risk and any mandatory requirements

List your services, typical deal sizes, and client types. Note any tender conditions or professional body minimum limits you must meet (common for architects, brokers, and healthcare settings). This gives you the floor for cover.

2) Choose your limit and the AOA/AOY split

Pick a limit of indemnity that matches the worst case you can imagine paying: rework costs, lost revenue claims, and legal fees. Insurers show limits as Any One Accident/Claim (AOA) and Aggregate for the Year (AOY). A 1:1 or 1:2 ratio is common. If contracts set a minimum, meet or exceed it.

3) Protect your retroactive date

Most Indian policies are claims-made, so cover depends on when the claim is made and reported—not when the work happened. Ask for a retroactive date that reaches back to your oldest work and keep coverage continuous at every renewal. This preserves “prior acts” for your professional indemnity insurance.

4) Add the extensions that fit your work

Top picks for many firms:

• Loss of documents (including data reconstruction)
• Breach of confidentiality
• Libel and slander (defamation)
• Unintentional IP infringement (where available)
  If you design or specify, check the wording for advice/design triggers and any sub-limits.

5) Set a deductible you can live with

A higher deductible (excess) lowers premium but raises your out-of-pocket on day one of a claim. Choose a number that won’t hurt cash flow.

6) Check how defence costs are treated

Ask if defence costs are inside the limit (they consume the cover) or outside the limit (separate). If they sit inside, consider a higher limit or look for first-rupee defence where available. This can make a big difference in long disputes.

7) Review wordings and claims support—not just price

Compare two or three insurers for:

• Clear insuring clause and exclusions (fraud, fines/penalties, pure contract guarantees)
• Panel law firms, response SLAs, and settlement authority
• Simple notification rules (who, how, and by when)
• Option to buy run-off (tail) cover when you retire or close a practice

8) Prepare the documents

You’ll usually need KYC, a proposal form, revenue by service line, prior claims/loss runs (if any), and key staff credentials. Clean inputs speed underwriting.

9) Bind the policy and diarise renewal

Once terms are agreed, bind cover, save the certificate, and calendar your renewal at least 30 days ahead. No gaps—claims-made cover depends on continuity.

What affects the price

Premiums reflect your industry, annual revenue, claims history, limit/deductible, and chosen extensions. Two similar firms can price very differently if one signs large, high-stakes contracts.

Pro tips for Indian buyers

• Keep a PDF of your certificate and policy wording handy for vendor onboarding and RFPs.
• Train one person to notify incidents early (even before a formal claim). Late notice can slow defence.
• If you change insurers, insist the new policy honours your retro date. That keeps your professional indemnity insurance useful for old projects.

Buy through Plum Business

Prefer a guided route? Compare options and get help preserving your retro date with Plum Business—built for Indian teams.

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Professional Indemnity Insurance FAQ

What is professional indemnity insurance?
It is a policy that pays your defence costs and client compensation when a mistake in your professional service causes financial loss. It is also called professional liability or E&O insurance.

Why do I need professional indemnity insurance?
One error can wipe out a year’s profit. This cover gives you a legal team and funds to settle or defend, so the mistake is survivable.

Who should buy professional indemnity insurance?
Brokers and some intermediaries must under IRDAI rules. Architects often need it for tenders. Doctors, lawyers, accountants, IT firms, consultants, and agencies should because their advice can cause client losses.‍

What does it cover and exclude?
It covers defence costs and damages tied to negligent acts or omissions in your services, plus add-ons like loss of documents, confidentiality, and defamation if listed. It excludes fraud, war/nuclear, pure goodwill loss, and contract penalties you agreed to.‍

What is a claims-made policy?
It covers claims made and reported during the policy period (or tail) for acts after the retroactive date—not when the work happened.

What is run-off cover?
Run-off (tail) lets you report new claims after the main policy ends, for work done earlier—handy when you retire or close the firm.

How do I choose the right professional indemnity insurance policy?
Match the limit to your risk, add the right extensions, keep your retro date, and confirm defence-cost treatment. Check the insurer’s claims track record.

What documents will I need to buy a policy?
KYC, a proposal form, service details, prior claims (loss runs), and sometimes credentials of key staff—insurers will tell you the exact list.

Bottom Line For Indian Professionals

Mistakes happen. Professional indemnity insurance makes them manageable. Choose a limit that fits your projects, add the extensions your work needs, keep your retroactive date alive, and never miss a renewal. When a tough letter arrives, you will have calm, counsel, and cover—ready to go.