If you were to face an allegation of professional negligence, the damage to your business – both financially and from a reputation perspective could be irreparable.
Professional indemnity (PI) insurance offers valuable peace of mind. It should help you to sleep better knowing your legal costs defending a claim and any compensation costs due will be covered, should the unthinkable happen.
However, arranging PI insurance that's right for your business requires careful consideration. In the challenging PI insurance market we're currently experiencing – with fewer providers and rising premiums – it's becoming increasingly difficult for engineers to get cover.
So, what does this mean for you, and what do you need to think about when reviewing your PI insurance?
How much professional indemnity insurance do I need?
The type of activities you undertake and projects you work on will determine your insurance premium. For example, higher risk engineering activities involving chemicals, nuclear and marine will demand higher premiums than the likes of construction, mechanical engineering or project management which carry lower risks.
Several factors will determine the level of PI insurance you should have in place, including:
- Contractual obligations – your contracts may specify that you have a certain level of PI insurance for a given period – even after the contract has ended.
- Value of your contracts – think about the worst-case scenario if you were to make a mistake and then face a claim for financial compensation. The value of the contract should influence the limit of indemnity you need.
- Cost – weighing up the PI insurance levels you need with the premium cost is something you'll need to consider carefully.
Use a professional indemnity insurance broker
Seek advice from an insurance broker who understands both the PI market and the engineering industry; they'll get to know your business and cut through the jargon to explain what you’re covered for.
Speaking to a broker can help you avoid duplication of cover and paying twice, ensuring you are not paying for more cover than you need.
They search the insurance market on your behalf to help find you the cover you need at a competitive price – an invaluable service in the current climate. Don't leave it too late to contact your broker if you're looking to renew your insurance; securing the terms you need may take longer than it has in previous years.
Expanding your services or taking on an extensive project?
If you are thinking about broadening the range of engineering services you offer, it's vital to check your PI insurance policy and ensure it adequately meets your changing needs. Suppose you don't update your policy to reflect the more significant risks your work entails, and you have to make a claim. In that case, you may find yourself in an unthinkable situation if your insurer deems your policy invalid concerning that claim.
Having the right level of PI insurance enables you to work confidently in the knowledge your business risks are covered. A specialist PI broker like Marsh Commercial can help you manage this process, aiming to give you peace of mind that your business is protected.
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