Experienced architects already understand the need to have architects indemnity insurance. The type of policy you will need to buy is formally known in the insurance industry as a professional indemnity insurance policy. If you are a graduate seeking to enter the profession on a self-employed basis, the need to take out a comprehensive architects indemnity policy should be in the forefront of your mind. Even if you plan to join a larger firm of architects on a contractor basis, you should check their existing policy wording of their professional indemnity insurance policy, to satisfy yourself it will protect any future recommendations or conclusions you give to a client.
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Architects Indemnity Insurance
Architects Indemnity Insurance-Do you need It
A professional indemnity insurance policy aims to protect any professional person that offers advice, skills and professional services to clients. In general terms, it provides a financial safety net to cover the cost of fixing a mistake, in the event of a claim for professional negligence, or liable and slander, breach of warranty, infringement of intellectual property, liability for loss of documents or dishonesty. The other main purpose of professional indemnity insurance, is to cover the policyholder for the legal costs of defending an action in the first place. For example, if a disgruntled client blames an architect for some kind of breach of duty of care, the policy will pay for the costs of employing legal services to defend themselves against the action. Sadly, as the United Kingdom has become more litigious, there has been increase in the number of claims. Even if these prove to be spurious, they still need to be defended. In a service driven economy that is dominated by technical skills, many professionals in the property sector (such as architects, surveyors and civil engineers), rely upon indemnity insurance to survive.
From an architect’s point of view, this type of indemnity insurance is a ‘must have’ type of policy. Indeed, the credibility of your business will depend upon its business reputation, through personal recommendations from satisfied clients. Producing a copy of your indemnity insurance policy may very well increase your chances of winning new business construction projects. A range of unexpected problems with construction designs may force your clients to pay for expensive building repair work at a later date. As a result, your once ‘trusted clients’ may turn against you, and blame you for alleged design flaws in your architectural recommendations. So whether you plan to provide architectural schematics to public sector housing projects, or private sector new build constructions – choosing right architects indemnity insurance policy, will provide that invaluable peace of mind that every architect deserves.
As the recession and credit crisis has stalled the housing boom, many local authorities and property investors have slashed their investment budgets and cancelled construction projects. Consequently, many architects have also had to respond by cutting their own overheads where ever possible. One area of cost cutting is indemnity insurance costs. By shopping around and comparing indemnity policies, many architects are trying to find the cheapest insurance deal. However, the levels and types of cover can vary between policies, so check the exclusions, extensions and covers sections carefully with your local insurance broker or insurance company.
When discussing the levels of cover required, bear in mind that the limit of indemnity is the total amount that will be paid for all claims arising within the policy period. Most policies are retroactive, which means the policy that is in force at the time the loss is notified, will still operate irrespective of when the work was carried out or the alleged negligence occurred. So it make senses to keep policy active into the future, in case an old client brings a claim for professional negligence. For example, imagine a situation where you have designed a retail industrial park. However, unfortunately due to some communication breakdown with the client, the electrical and plumbing infrastructure could not be properly upgraded a few years down the track, due to confusion over the architectural schematics. As a result, the client decides to sue you for breach of duty of care. Even though it may have been the client’s fault that the original design plans were mislaid or confused, you will still need to pay for legal representation to negotiate and/or prove that you were not liable.
Before quoting you a price for a new policy, you will be asked to complete an insurance application form. The insurance industry recognises an architect as one of the more ‘safer’ and well-known professions of the construction industry. As a highly regulated profession, insurers providing indemnity policies, understand that architects must adhere to strict laws of compliance, codes of conduct and professional standards. Similarly, the UK insurance industry is very familiar with the types of claims arising from disputes involving complex building contracts. Consequently, many professional indemnity insurance policies for architects, will ask broadly similar underwriting questions before a quote can be provided. On most applications forms, the insurer will be checking that the architect is a registered member of the Royal Institute of British Architects (RIBA). Some insurance companies may also ask for a copy of their CV, to assess who their clients are, how much experience qualifications they have, and lastly what the academic status is.
Within the trade of ‘architect’, insurers may also want to understand what type of work an architect has undertaken in the past, to judge how much risk may be involved in future projects. This can be achieved by splitting out the fee income an architect has generated from past projects. For example, any purpose-built block of flats structural design work, is generally high risk than simpler remedial work (such as plans for a residential conservatory extension), where the work did not affect the structural foundations of the building. Alternatively, if the bulk of the fee income was generated from consultancy and feasibility studies, (where no actual work was undertaken), the risk is deemed to be much lower. Lastly, any interior design work in the retail commercial sector, is likely to be deemed fairly level low risk, due to the fact that retail outlets tend to exchange owners every few years or so.
Insurers may also want three years worth of accounts data to compare. They may also request information regarding any handling of client money or confidential documents, in relation to building projects involving multiple third parties. Lastly they will need details of any previous claims for professional negligence against either you or your Practice. Just like the principles of motor insurance, any settled insurance claims (where you were at fault), are likely to result in an increase in your next years renewal premium. With these points in mind, the application forms for architects indemnity insurance policy are relatively straightforward.
Please contact us to get a no obligation quote for architects indemnity insurance.