The professional risks — and the subsequent business insurance needs — of architects, engineers, and design professionals can vary greatly from field to field, but for policy-writing purposes, insurance providers tend to lump them together. Much of the insurance information on the Internet is not directed at you, the owners of such businesses.
Additionally, your risks as a startup and boutique business are different from those of other types of companies. With so much information to sift through, how can you be sure the information you read is relevant to your type of business?
Insureon has boiled down all this information into the top four things every architect, engineer, and design professional should know before buying their business insurance plan.
1. Types of Small Business Insurance
1. Types of Small Business Insurance for Architects, Engineers, & Design Professionals
Your individual need might not need all this coverage — or the same amount of each coverage — but below is a list of the options readily available to architects, engineers, and design professionals:
- General Liability. Every design-based business whether you work out of your home or not — needs liability insurance. If someone says that you, your employees, or your services hurt them or damaged their property, this coverage will provide both defense and damages.
- Property Insurance. Every design-based business either owns an office space or business property (furnishings, computer equipment, etc.) or both. This policy will protect your firm in the event of theft, fire, or wind damage.
- Business Owner's Policy (BOP). If your firm is considered "low-risk" by insurers, you may benefit from bundling your General Liability and Property Insurance policies into one, discounted packaged called a BOP.
- Errors & Omissions. This type of policy is sometimes referred to as Professional Liability, and it's extremely important in your field, which often involved long, complicated services and many contracts with different people. Each one is an opportunity for a lawsuit that says your firm didn't deliver the service it was supposed to.
- Workers' Compensation. This policy pays for the medical costs and at least some percentage of lost wages of employees who suffer from a work-related illness or injury. Your design-based office might not be a mind field, but your job sometimes takes you off-site to locations where injury is more likely.
- Umbrella / Excess Liability. Sometimes in a costly lawsuit or natural disaster, the damages will exceed that of your primary policies. That's where this policy comes in — and if might be particularly important for firms who work on large or historical projects, or with wealthy clients.
- Cyber Liability. Your firm probably stores sensitive client information (credit card numbers, contact information) on its computer network — making it prone to data theft or mismanagement. This policy helps you keep your business running in the event of a data-breach lawsuit.
The thing to understand here is that each policy can be altered to address the specific risks of your firm.
2. The Types of Actions That Result in Claims
2. The Types of Actions That Result in Claims
If you are the business owner of an architecture, engineering, or other design-based firm, you will be trying to mitigate risk from the beginning of a project to the end. In general, Professional Liability claims are your worst enemy: the services you provide tend to be long and multifaceted and involve many different people — there is a lot of room and opportunity for someone to claim that your services are not what they should be. It's important to understand what, exactly, your firm can be held accountable for:
- The negligence of contractors and others working on the project.
- Faulty cost estimates.
- Delays in construction or the completion of a project.
- Errors found in planning and feasibility studies, even if you're not the architect of record.
- A client's unrealistic expectations (even if this lawsuit is unfounded, you'll still have to defend yourself.
The best defense for these claims is to mitigate as much risk as possible in the language of your contracts and manage your client's expectations through the length of a project. Be sure to use schedules and to be honest and quick when addressing a delay.
In addition, you may run across a client who refuses to pay his fees. Know that, if you sue, it is not uncommon to get slapped with a countersuit that claims you or your firm was negligent.
3. When You Should Reassess
3. When You Should Reassess Your Business Insurance Plan
Most startup and small-business owners understand that if they purchase, say, a new business vehicle, they should contact their insurance provider just as they would contact their personal auto insurance provider if they bought a new personal car.
But, in general, business owners should reevaluate their business insurance plan whenever something changes about their business. This could include…
- Purchasing or renting new business property.
- Moving locations.
- Buying or leasing new equipment.
- Adding more or different services.
Even if the change seems insignificant to you, it may mean that your business insurance plan should be adjusted. In general, it's a good idea to reassess your insurance plan at least once a year.
4. How to Save Money
4. How to Save Money on Your Business Insurance Plan
When it comes to determining the monthly premiums for your design-based firm, insurance providers factor in many facets of your business including…
- Your claims history.
- The type of contract you use.
- The kind of project(s) you usually work on.
- Specialty coverage (if you need it).
- The amount of coverage needed for previous acts.
Some types of projects are riskier in the eyes of insurers, like condos — they tend to have high litigation costs when compared to the relatively low design fees. Further, unique or historical projects may increase your premium costs.
But there are two major things you can do to try to keep your policies as economical as possible:
- Thoroughly document and report any training practices and structured supervising of employees.
- Completely and accurately fill out your insurance application forms.
This work may be tedious, but it is often enough to demonstrate that your architecture, engineering, or design firm deserves a lower monthly premium.
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