Whether you provide consultancy services, have access to confidential customer information, or are a graphic designer, freelancer, or contractor, you are not immune from professional mistakes that may lead to costly claims. Likewise, you are not immune from claims even if your negligence, inadequate service, or mistakes are alleged and exist only in the head of the claimant.
In both cases, you may face exorbitant legal bills, even if you are later justified by the court. Luckily, though, you can safeguard yourself against such claims by purchasing indemnity insurance. In many regards, indemnity insurance is similar to E&O insurance.
A special type of liability insurance, indemnity insurance covers counselors, advisors, attorneys, brokers, freelancers, and other professionals from third-party claims based on alleged or actual negligence, malpractice, or misjudgment. Indemnity insurance guarantees that the insurer will compensate the insured for the losses or damages caused by claims against the insured.
Although indemnity insurance is not a general legal requirement, it may be mandatory depending on the state and occupation. For example, in many jurisdictions, lawyers are required to have indemnity insurance. Not having indemnity insurance can dramatically increase your financial risks, as you may be liable for costs relating to claims made against you.
Indemnity insurance works just like any other form of insurance: in exchange for the premium, the insurer guarantees to compensate for the financial losses of the policyholder as per the insurance policy. Note, however, that indemnity insurance is not the same as general liability insurance, as it does not include physical and property damage.
Unlike liability insurance, indemnity insurance does not cover physical or property damage.
The duration of your indemnity insurance policy may vary depending on your goals, budget, and other circumstances.
The premium cost depends on the type of insurance policy as well as the amount of coverage, deductible, co-payment, the number of people covered, how likely you are to make a claim, and other factors. The minimum monthly premium is about $10.
Unlike standard health insurance plans, indemnity health insurance allows you to choose your healthcare provider and primary care doctor while reimbursing a certain part of your medical costs. You can self-refer to healthcare professionals at the expense of a higher premium.
Health maintenance organizations (HMOs) and preferred provider organizations (PPOs) will likely force you to a particular primary care provider, whereas an indemnity health insurance plan will leave the choice to you.
| Total Medical Costs | Deductible | Co-Payment | Total Out-of-Pocket Payment |
| $1,000 | $300 | 15%, or $105 | $405 |
| $5,000 | $300 | 15%, or $705 | $1,005 |
| $10,000 | $300 | 15%, or $1,455 | $1,755 |
Use the advantages of your indemnity plan. Indemnity health insurance allows you to choose almost any doctor with very few limitations, including geographical. It is most practical where traditional healthcare options, such as PPOs and HMOs, are unavailable.
Keep in mind, there are traditional and fixed indemnity health insurance plans. The former provides all major medical coverage – hospital care, doctor visits, preventative care, prescription medicine, etc. – whereas the latter only complement a major medical insurance plan.
A supplemental type of insurance, hospital indemnity insurance covers your expenses for hospital stays and associated costs in some cases. Most policies cover ICO, CCU, and hospital confinement, whereas some policies also cover outpatient services, continuous care, emergency rooms, and ambulances.
It depends on your health, age, risk tolerance, budget, and how well you are covered by your other health insurance policies. In 2019, the average cost of an inpatient stay at U.S. hospitals was $2,738 at a nonprofit, $2,149 at a for-profit, and $2,372 at a state or local government hospital.
Indemnity insurance can reduce your financial risks stemming from claims for low quality of work, errors, malpractice, negligence, and misjudgment. With an affordable monthly premium, you can get the confidence and peace of mind you deserve.
Oleksandr is an expert in deep research. He covers various insurance topics across verticals, adopting to every local law.
