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What is efficacy insurance and do you need it?

Efficacy insurance, which is also commonly referred to as inefficacy insurance, is designed to protect you should a product you install fail to perform its intended function. That is why the cover is also referred to as “failure to perform” insurance.

If this failure to perform causes harm to your customer or their property, or even a third party, you could be liable and may even find yourself facing a potentially costly claim. When you offer a specialist product or service, your reputation as a business is vital. Efficacy cover could provide an extra layer of protection for you, as well as your customers. Facing a claim without the right insurance in place could be costly both financially, and to your reputation.

Could efficacy insurance be right for me?

If your work involves the supply or installation of performance critical equipment, for example electrical contracting, security products or fire prevention products such as fire alarms, efficacy insurance could be beneficial and provide that extra peace of mind for you and your customers. 

Considering fire alarm installation as an example, worrying statistics were released in 2019. The Local Government Association reported that mains powered smoke alarms failed to sound in one fifth of residential fires in the UK during 2018 ‒ 2019. The result of a failure to perform in this situation could have potentially devastating results.

Due to the potential high risk, many business insurance policies do not include efficacy insurance. For this reason, it is important to check that your policy does not include an efficacy exclusion. While buying an off- the-shelf business insurance policy may save you time and money in the short term, taking the time to check for exclusions, or working with a specialist insurance broker can be invaluable to make sure you’re fully protected. After all, the worst time to find out you don’t have the right cover is when you have to make a claim.

If you aren’t sure you have efficacy cover, or you think that your existing insurance policy could benefit from the addition of efficacy insurance, speak to your usual contact for more information.


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