What does Limit of Indemnity mean? | Professional Indemnity Insurance (2024)

FAQs

What does Limit of Indemnity mean? | Professional Indemnity Insurance? ›

The Limit of Indemnity (LOI) is the maximum amount the insurer will pay under a policy during the policy period. Legal costs may be included within the Limit of Indemnity or may be covered as an additional amount, depending on the policy purchased.

The limit of indemnity (LOI) is the monetary amount of cover provided under a professional indemnity insurance policy and it's a policyholders responsibility to decide the amount which is adequate to fully protect their business.

In insurance terms, the "sums insured" and "limits of indemnity" refer to the maximum amount that the insurer will pay out in the event of a claim. Sums insured are typically used in policies such as property insurance or contents insurance, while limits of indemnity are more common in liability insurance policies.

Professional indemnity insurance protects you against claims for loss or damage made by clients or third parties as a result of the impact of negligent services you provided or negligent advice you offered. Compensation claims can be brought against you even if you provided a service or offered advice for free.

Although there is no set formula in calculating a limit of Indemnity, there are a number of considerations when assessing what limit would be suitable when deciding what you want from your policy and how it protects you. Do you want the peace of mind knowing your operating margins are protected?

Limited indemnity medical insurance is a type of health coverage that pays out a fixed amount for specific medical services or conditions. It is often used as supplemental insurance to cover out-of-pocket expenses that are not covered by primary health insurance plans.

Monthly limit of indemnity—suspends the coinsurance and will pay the business income for 3, 4 or 6 months depending on the selection made. Each month 1/3, 1/4 or 1/6 of the business limit of liability may be available to pay for the business income loss of that month.

You can usually choose between £50,000 and £5 million of professional indemnity insurance. Your regulator, professional body or client contracts may tell you the minimum amount you need. Think too about the scope of your projects and the potential compensation demand if something went wrong.

You should look to limit indemnification clauses by narrowing their scope, putting in caps on damages, and clearly defining the indemnifiable acts (i.e. the representations and warranties in the example above). Also consider purchasing insurance as a means to limit your financial risk.

The limitation of liability does not include amounts that are or would have been recoverable under a policy of professional indemnity insurance; and. The $1 million cap on liability would apply to uninsured loss or damage.

What does professional indemnity insurance not cover? ›

Losses due to Prohibited Acts or Omissions: The policy does not cover losses caused by dishonest, fraudulent, criminal, or malicious acts or omissions.

Professional indemnity claim example

Professional indemnity insurance provides cover for a range of scenarios that could cause financial loss or damage to your client, such as loss of documents, breach of confidentiality, making defamatory statements, breaching copyright, or incorrect advice.

What is Limit of Indemnity? The Limit of Indemnity (LOI) is the maximum amount the insurer will pay under a policy during the policy period. Legal costs may be included within the Limit of Indemnity or may be covered as an additional amount, depending on the policy purchased.

If your insurer does not add a limit to how much they can indemnify you, they could be held liable for unlimited amounts. A limit of indemnity allows insurers to quantify their maximum exposure by pricing the risk they are undertaking and to gauge their potential risk exposures.

All insurance companies have a maximum limit up to which they can offer insurance cover. The amount will vary between insurers but is normally up to £ 5 million for a primary professional indemnity policy.

The limit of indemnity is the maximum amount of the insurer's liability for any claim or claims under a policy. Each policy will state whether the limit is; Any one occurrence in which case the the limit of indemnity is the maximum payable in respect of any one claim.

Even if the contract specifically says the limit applies to an indemnity … it doesn't. The indemnity obligation remains unlimited.

Claims for breach of a warranty or condition of a contract may be made within 6 years of the breach of contract. In the cases of indemnification, the limitation period for an indemnity starts when the indemnifying party's liability is established when the conditions of the indemnity have been satisfied.

The regulation requires policies to provide a minimum level of indemnity coverage of not less than $1 million for any one claim; and not less than $3 million in the aggregate, for all claims made during the period of insurance.