Indemnity insurance: the facts

Indemnity insurance covers all insurance policies that indemnify professionals against workplace compensation claims. These types of policies aim to protect business owners as well as their employees when they are found to be at fault and a compensation claim is made. In fact, the word ‘indemnity’ is often used as a synonym for compensation. It is an insurance that pays out to make the indemnified party “whole” again.

Understanding indemnity insurance

A car insurance policy is a type of indemnity insurance. For instance, you take out a car insurance policy and you have an accident then your insurance company has a duty to indemnify you. This could include payments to repair your vehicle, compensation payments for pain and suffering or loss of income as a direct result of the car accident and even covering the cost of a rental car while your car is in for repairs.

Basically, if you carry indemnity insurance, it is your insurance carrier’s obligation to see that the indemnity for which you are insured is applied if needed. In other words, it is their duty to uphold a promise of protection against a specific event. This protection comes in the form of making you “whole” again if this event should occur.

An indemnity insurance policy will have a limiting amount of how much compensation can be paid out in terms of the policy specifics. What is most notable though, is that your insurance provider will not be obliged to pay out the entire policy amount for a claim. Indemnity insurance will compensate the policy beneficiary for actual economic losses. This means that when making a claim, you would have to prove the amount of money you have lost, whether through loss of income, pain and suffering or the cost of replacing lost goods. Your recovery will be limited to the amount of loss that you can prove.

The same principle applies if, as the victim of an accident that was somebody else’s fault, you need to make a claim against their insurers. You will need to be able to demonstrate the expenses you incurred as a direct result of the accident by way of receipts, as well as having evidence of the pain and suffering you endured in the form of medical reports.

Indemnity insurance in the service field

Indemnity insurance also extends into the service field in the form of professional indemnity insurance. For example, as a vet you have provided advice to a dog owner. As a result of following your advice, the dog dies. The owner of the dog could seek a compensation claim from you. Your indemnity insurance would cover the claim in this case.

Another example would be an architect. If an architect has made a mistake in the plans for a building project and the mistake is only spotted once construction has already started, it could cause financial loss to the architect’s client. Lost working hours and wasted building materials would need to be compensated. The architect’s professional indemnity insurance would cover this.

Other occupations that should be protected by professional indemnity insurance include journalists, financial advisers, business consultants, accountants and many others.

Getting the facts on indemnity insurance

Accident Advice Helpline has a 24-hour, free legal helpline. Call us now on 0800 689 0500 or 0333 500 0993 from a mobile phone.

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