You work hard for your money. And when something goes wrong, it’s tough to watch that money drain away. This is where indemnity insurance comes into play. It helps protect you and your bank account when things go wrong.
It can be a little tough to wrap your head around, but it’s an important product that you should be aware of, whether you’re in a profession that provides a service or advice, or for drivers everywhere.
Keep reading for the facts on indemnity insurance, including indemnity car insurance—if you get behind the wheel, you’re going to want to know about this.
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Let’s quickly level set and explain some key terms, which will help clarify indemnity insurance as a whole:
You can find indemnity clauses in many contracts and agreements; for example, a doctor might indemnify a hospital against any lawsuits as a result of the doctor’s actions, so the hospital wouldn’t be responsible.
Indemnity insurance is separate from indemnity as a whole. We’ll dive into that next.
Now that you have a better understanding of what an indemnity is, it’s time to explore indemnity insurance. It’s a mouthful, but it’s actually pretty important to anyone who performs a service, because it opens them up to liability.
Indemnity insurance is technically separate from an indemnity clause in a contract, but it functions similarly. Essentially, you as the insured would purchase a policy that insures you from someone suing you for a loss or damage. By paying monthly or annual premiums into that policy, the insurance provider protects you from such risk and would compensate the other party on your behalf.
Still with us? Good. Malpractice insurance is a very common form of indemnity insurance and it helps put the concept into perspective. Malpractice insurance is critical for doctors, because it protects them from lawsuits as a result of an error in judgment or diagnosis. If the doctor is sued, malpractice insurance kicks in and compensates the person who has sued.
Other common forms of indemnity insurance include:
Indemnity insurance sometimes also has an endorsement that extends the coverage even further to protect against events that happened while the policy was active, even if it’s no longer in effect. This can be incredibly helpful for delayed lawsuits.
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Indemnity insurance is more common than you might think, since so many businesses and individuals can be put at risk for being sued just as a result of their work.
Here are some of the people that might benefit from indemnity insurance:
Many professionals don’t have a choice when it comes to indemnity insurance. Professionals like doctors, lawyers, insurance agents, financial advisers, accountants, mortgage brokers and others are most vulnerable to lawsuits given the nature of the advice they’re giving, even if they have the best intentions.
For example, an accountant could be found negligent for advising a client on a tax matter that ends up resulting in fines or additional taxes to pay. Contractors could be sued because they didn’t perform claims as promised. Software programmers could be sued if they design an app for a company but violated another party’s copyright while doing so, leading to the company with the app being sued.
There are many reasons to need indemnity insurance, and so many individuals and businesses that can benefit.
If you’re thinking this sounds familiar, you’re not wrong. If you have auto insurance, you have a form of indemnity insurance. You’re the indemnitee, and your insurance provider is the indemnitor. This means that if you’re sued as a result of an accident you’ve caused, the insurance provider indemnifies you and will compensate the other party on your behalf.
Indemnity insurance comes into play in the following aspects of an auto insurance policy:
In almost all states, you need to have liability insurance at a minimum to get behind the wheel of the car. This is essentially indemnity insurance, so all drivers have a form of indemnity insurance whether they realize it or not.
Aside from being legally required, auto insurance just makes good sense. The costs from an accident can very quickly spiral out of control, from property damage to medical bills, legal feels and damages awarded. These costs can end up in the tens of thousands to the hundreds of thousands very easily, and most people simply aren’t prepared to pay that kind of money.
Auto insurance helps protect you from these costs that could result from an error in judgment while driving that happens in the blink of an eye, which could happen to any of us.
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The short answer is yes. The long answer? It depends on your profession, but mostly yes. If you’re providing any kind of service or advice that opens you up to being sued, indemnity insurance protects you from the kind of costs that can bankrupt someone. And if you’re a driver, then indemnity car insurance is definitely worth it, and usually legally required.
For many, professional indemnity insurance is indeed tax deductible. This is because it’s essentially a business expense, which means you can write it off. This just adds to the list of reasons why indemnity insurance is a good idea.
Indemnity insurance is designed to protect you from paying out monster damages, the type of which can wipe out your assets and change your life. For many professionals, indemnity insurance is not only required but a no brainer.
For drivers, indemnity car insurance is also important. We’re all human and mistakes happen while driving, and you don’t deserve to lose your life savings over an accident. Indemnity car insurance protects you, your bank account, and your future.
When it comes to indemnity insurance, it’s better to be safe than sorry. And being safe costs less than you might think. Go ahead and get access to free quotes here so you can start feeling the peace of mind that comes with indemnity insurance today.
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Margaret Huntley Margaret Huntley is a creative writing and philosophy student at Western University. She has been working as a freelance writer for over two years and has written about everything from insurance, to poker, to health and wellness for international businesses.
