The decision to purchase professional liability insurance for an architectural firm, or even a freelancer or independent contractor, is not necessarily an easy one to make at the outset. When an architect is faced with that decision, it is possibly an indicator that there have been some significant happenings, such as winning a large contract or sudden expansion, that might warrant the extra protection an insurance policy can provide. Although to some architects professional liability may seem like a superfluous expense, it truly is an expense that can provide untold benefits. Consider the following 6 reasons why professional liability insurance for architects is important.
1. Protects against alleged errors and omissions
The primary purpose of professional liability insurance is to protect the policyholder from any potential errors that may occur on the job. In a design field such as architecture, it is not uncommon for even the most skilled worker to improperly measure or simply incorrectly notate the wrong dimensions. A simple calculating or demarcation error can result in errors that cost thousands of dollars to fix. Without a professional liability insurance policy in place, the firm would be responsible for paying to fix those errors out of the company’s own pocket. The same situation holds true for an architect who is working on an independent contractor basis.
2. Commercial General Liability (CGL) coverage is not enough
Most insurance companies offer CGL coverage for businesses who need an insurance policy. However, CGL insurance covers a policyholder from incidents such accidents that occur on the property or property damage that could happen to any business, regardless of the work that is done there. CGL insurance is not meant to cover incidents that are strictly related to the work done in a design field such as architecture. Most CGL policies strictly exclude personal liability claims, so they are not sufficient for the needs of an architectural office whereas professional liability policies are specialized and diverse in their coverage.
3. The cost is worth the benefit
Many small architectural firms opt to go without professional liability insurance as a cost-saving measure, and that choice backfires on them. It can seem like an easy decision to opt-out of purchasing an insurance policy for a small job that seems low-risk. However, if something goes wrong, the cost to repair the damage is far greater than an annual insurance premium. Architects who wisely cover themselves with professional liability insurance give themselves the peace of mind that knowing they are covered regardless of the size of an issue. Professional liability insurance will cover any court costs involved in a lawsuit as well as well as any settlement costs that are incurred. A firm that would have to cover these costs themselves could easily go bankrupt as a result.
4. Ongoing risk management services
Many insurance companies that offer professional liability insurance also provide risk-
management services to their clients. A representative from the insurance company will review standards and practices with the firm. The insurance company will also go over client-provided contracts to find any holes and provide continuing education on how to reduce or avoid unnecessary liability. This service is a benefit to the architect, the firm, and the insurance company. The more education the insurance company can provide to the client, the less likely it will be that the firm will make a costly claim.
5. Handle claims of all sizes
Even seemingly minor actions can result in claims. Many architects wrongly believe that professional liability insurance can only help for catastrophic events. However, this assumption is not true. Architects can be held liable for mistakes that are made by contractors and others who are working on a project. Further, professional liability insurance also provides coverage for minor issues such as faulty cost estimates or delays in construction. Most professional liability claims are results of failure to manage expectations than to construction failure. Architectural firms need to protect themselves from these smaller issues just as much as the larger, less likely ones.
6. Minimize costs
Obtaining professional liability insurance is a great way for an architect to minimize costs. Whether it is an independent contractor, a small firm in its infancy, or a large, established corporation, every architect is always looking to save money wherever possible. Although the premium for each policy is unique, as it is set by factors specific to the policyholder, one factor remains constant; the cost of professional liability insurance is more cost-effective than the costs that could be incurred without it.
No architect should be without professional liability insurance. It is a safety net that protects an architect from having to incur the high cost of a lawsuit. Even if a claim is never made against the policy, the money an architect spends on a policy is worth the security and peace of mind it provides. If you are an architect and in need of professional liability insurance, a local insurance agent can provide the answers you need. Reach out to discuss your needs and to get a quote right away.
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