Cover From All Angles

For Dr. Sanjeev Gulati, 45, a senior consultant nephrologist with Fortis Hospitals, Delhi, it was about bringing a good habit home when he relocated to India from Canada some four years back. As a doctor in a private hospital here, the first thing he had to do was to get a professional indemnity cover. “The rate of litigations is high internationally and very expensive. So, it is mandatory to have a professional liability cover,” he says.
Back in India, even though the hospital did not require him get such a cover, Gulati did buy one as “the rate of litigation is on an increase even in India”, he says. “Moreover, as a doctor I feel protected. You never know when a client might sue you and for what reason. With insurance I can at least ward off that worry,” he reasons.
Protecting something on which hinges the rest of our lives should be a priority. Gulati, as a practitioner of medicine, faces the risk to his profession directly. Other people, too, also need to get cover against any liability.
Just so that you aren’t caught off guard, non-life insurers offer cover against liabilities in three broad areas: professional liability, motor third-party liability, and public liability. These covers pay your compensation and any legal fees on your behalf.
These policies are renewed every year. A claim from an accident that occurred in the previous policy year is covered in the current year. Professional and public liability insurance is also available for a specific duration or events.
Professional Liability At many places, professional indemnity is mandatory. It may or may not be provided by the employer. For example, for Gulati’s wife, Dr. Kiran Gulati, a radiologist with Apollo Clinic and Cradle Birthing Center, New Delhi, professional indemnity was mandatory. “Consulting doctors have to buy their own covers while the company provides it for resident doctors,” she says.
The Gulatis have fortunately not needed to use their respective covers. But should anything go awry they can rest assured that the expenses will be taken care of.
Professional liability insurance was typically taken by doctors earlier, but is now used in other professions as well—lawyers, chartered accountants, architects, engineers, adventure tour operators, media professionals, and people from many other professions.
What does it cover. This policy covers you against any financial loss because of bodily injury borne by your clients due to your work-related mishaps. For instance, a doctor can be sued for performing an operation, which the client thought was an act of error. Or, a lawyer could be hauled up before a court of law if a client feels he lost a case because of professional shortcomings in the lawyer.
The policy, however, does not provide cover for any wilful act of negligence or deliberate act of error or criminal intent by the professional.
Liability cover not only pays for the amount of claim that may arise as compensation, but also your legal fees. This means that you don’t feel a pinch irrespective of which way the court’s judgement goes. What you will need to pay yourself are the statutory fines and penalties.
Premium calculator. Premiums are usually worked out on the basis of the profession, business turnover and the extent of jurisdiction one would want (that is, you could be covered only in India or worldwide). Says Amol Phadnis, director, Review Risk Management Services, an insurance broker: “The turnover helps the insurer decide the risk probability of an individual. A higher turnover would mean more clients and a greater probability of errors and omissions. Hence a higher premium would be charged on such a profile as compared to one with a lower turnover.”
The profession, too, makes a difference. Says T.A. Ramalingam, head, underwriting, Bajaj Allianz General Insurance: “Any profession can be covered but we typically don’t cover lawyers and media professionals as the stakes are high and makes very little underwriting sense to us.”
Double layers. A typical liability policy is divided into two levels—any one accident (AOA) and any one year (AOY). In the any one accident level, there is a limit to the amount you can claim from the insurer for each case filed against you. In any one year, all mishaps in a year can be claimed for provided the total amount does not exceed the sum insured. This means that if your AOA limit was capped at Rs 10 lakh and AOY limit was capped at Rs 40 lakh, your insurer will pay a maximum of Rs 10 lakh for any one accident subject to a limit of Rs 40 lakh in any one year. This distinction in sub-limits, however, doesn’t apply to third-party liability and public liability policies.
To ensure that having a cover does not make a person lax at work, the cover comes with a deductible clause. This means that a part of the claim amount will have to be borne by you. Says Ramalingam: “It could be anywhere between 0.25 per cent and 0.5 per cent of the claim amount.”
Motor Third Party Liability This is the first cover that you need to buy even before you take your car out of the showroom. As per the Motor Vehicles Act, any vehicle that plies on the road needs to have a third-party cover.
What does it cover. This policy provides cover in case you damage property or cause an accident or loss of life of a third party. Again, it does not cover a deliberate act or a criminal intent.
Usually there is no cap on the sum insured for a bodily injury or loss of life and the entire amount of compensation is borne by the insurers, excluding any deductibles. Says Ajay Bimbhet, managing director, Royal Sundaram Alliance Insurance: “The liability for third party bodily injury or death is unlimited as per the statute. When awarding damages, the courts take into consideration the earning capacity and age of the injured/deceased person. But for third-party property damage, the maximum liability is Rs 7.50 lakh and the mandatory (minimum) liability is Rs 6,000.”
Like the professional liability policy, the motor third party liability also covers the compensation and legal fees and interest on compensation awarded.
Premium. Third-party motor premiums are still under tariff, that is, they are controlled by the Insurance Regulatory and Development Authority. This means that premiums are pre-determined and the same across insurers.
Public liability As the name suggests, a public liability policy protects you against any mishap resulting in injury or death of a third party or damage to the property of a third party. This policy is popular with hoteliers, restaurant owners and multiplexes. For an individual, the policy comes tucked in with a householder’s package policy and cannot be bought by itself. Explains Ramalingam: “Public liability comes with householder’s packaged policy as, on a standalone basis for individuals, the premium size could be very small, which doesn’t make underwriting sense for us.”
What does it cover. This cover is optional when buying a householder’s policy. It covers accidents occurring within the premises of the insured’s house, for example, your neighbour could pull you up if your AC fell on their brand new Honda CRV.
Again the concepts of AOA and AOY are applied here, but the limits are more relaxed. Says Phadnis: “Insurers mostly don’t have any sub-caps in the form of AOA. So, an accident can qualify for the entire sum insured in a year.” This policy, however, is not much used as chances of a guest filing suit against you is little. But as the cost of assets rise, having public liability insurance may make a lot of sense.
Premium. As this cover comes as a part of a householder’s policy, there is no separate premium for it.
Threats to your life and health are not the only dangers you face. A road accident or a professional mishap has the potential to jeopardise your otherwise well-planned life. Cover yourself with more layers of insurance, and stay warm and dry