Factors That Affect Architects and Engineers Professional Liability Premium
Errors and omissions or professional liability insurance protect professionals against claims of omissions, errors, and negligence in their designated duties. Note that the premiums differ for every policy and every business design discipline. So which factors influence these premiums? We’ll discuss this in the guide below.
Why Do Architects and Engineers Need Professional Liability Insurance?
important of these is legal protection.
Which Insurance Do Architects and Engineers Need?
The premiums for architects’ and engineers’ professional liability insurance policies depend on
several factors. These include services, project nature, services offered, the number of employees, discipline, and risk management. Let’s look at these factors individually.
The discipline or type of building design service you provide will impact your premium. Here are some common building design disciplines:
- Building Inspector
- Civil Engineer
- Project Manager
- Control System Integrator
- Industrial Engineer
- Interior Designer
- Land Surveyor
- Landscape Architect
- Transportation Engineer
- Electrical Engineer
- Environmental Engineer
The project’s nature mainly involves its scope and complexity. Let’s compare two scenarios.
Engineering firm A is working on a transportation bridge to facilitate commutes for 20,000 vehicles daily. Meanwhile, firm B is creating a parking lot for a hair salon. The project’s nature mainly involves its scope and complexity. Let’s compare two scenarios. Which of the two has a high-cost and high-risk project? The former. So, they’ll have to pay higher premiums too.
Here are some high-risk projects that warrant high premiums:
- Chemical plants
- Airport runways
- Processing, manufacturing, and production buildings
- Dams and levees
- Hospitals Meanwhile, the follower construction projects carry lesser risk:
- Parking lots
- Playgrounds and parks
Level of Involvement
The level of involvement refers to the actual tasks an architect or engineer does in a project.
Let’s say Firm A wants to get professional liability insurance. The insurer will want to know if they only create blueprints for construction projects or if they also supervise the process. Ultimately, the latter will come with a higher premium. Now, if the firm also builds the structure, its premium will increase even more. As a rule of thumb, the more actively involved an engineer is, the higher their premium will be.
Number/Types of Personnel
Before your insurer chooses a premium, they’d want to know:
- How many people work at the firm/agency?
- How long have the employees been working at the firm?
- Which positions are they in?
- How many people are employed in a specific position?
- How many of these employees are licensed?
government projects are mostly high-cost ventures with a significant risk level. That instantly raises your premiums.
How to Lower Your Professional Liability Insurance Premiums?
Small architectural firms and solo engineers often find it hard to pay a high premium. Here are some ways to tackle this:
- Clean Record: Previous claims can affect your policy’s rate significantly. So, keep a clean record to prevent being flagged as a ‘risky’ business.
- Deductible Limit: If possible, select a higher deductible limit. It is the amount you’ll pay out of pocket before liability insurance kicks in. A higher deductible will lower your
- Shop Around: Ask your agent to get quotes from at least five insurance companies before settling for one.