Professional indemnity insurance offers builders many benefits. As building projects become more complex, development firms have come to rely more on outsourcing and subcontracting. With more parties involved in a project, so is there an increased risk.
Professional indemnity insurance protects the firm from the cost of delays, repairs and under-serviced utilities. Professional indemnity insurance gives builders security against any financial fallout resulting from a breach of professional duty. Given the number of risks a builder are exposed to, PI is highly beneficial to maintaining the builder's financial stability.
Finder ran some business insurance quotes for a NSW-based blue collar worker. We found a professional indemnity policy may cost $190.61 per month. This was the average of 2 indicative quotes and was correct as of 29 June 2023.
Professional indemnity insurance protects builders from the risk of litigation. Construction is a high-risk industry and it is crucial for a builder to be prepared against the costly impact of a negligence claim. If a builder gives negligent advice, breaches client privacy or loses vital documents, they may face legal action. The scale and investment of a construction project means that any negligence on behalf of the builder is likely to have severe financial consequences.
Professional indemnity insurance is essential for providing builders with a financial fail safe should something terrible happen. Aside from the financial security provided by PI insurance, the policy also has other advantages for builders. These include:
Professional indemnity insurance, which is a type of business cover, provides cover for claims made against you for breaching your professional duty. These claims most commonly involve acts of negligence and behaving in a way that is wrongful and/or misleading.
A typical professional indemnity insurance policy will provide cover for the following:
Professional indemnity insurance will provide cover for builders who breach their professional duty in respect to common, statute and/or contractual law. This includes cover for unintentional slander, libel and defamation, loss or damage of documents, unintentional breaches of the trade practices act, employee liability such as unfair dismissal and harassment, dishonest acts of employees, run off protection for outgoing partners and unintentional breaches of copyright law.
Each professional indemnity insurance policy is tailor-made to address the risks of each industry. Builders working in the construction sector would have access to coverage that is specific to their workplace and clients.
Professional indemnity insurance benefits its user by providing financial security from expensive professional indemnity claims. Its primary objective is to protect working professionals like builders from financial loss. According to the Insurance Council of Australia, approximately 70% of uninsured and underinsured small businesses do not recover from a major insurance claim.
Having protection against potential legal claims, a builder can work without worrying if their actions or advice is in breach of their professional duty. This is useful or a builder who wants to innovate but is concerned by possible financial ramifications.
Professional indemnity insurance also benefits its user by mitigating the risk of human error. Clerical mistakes are inevitable in most work situations. Documents can be lost or damaged, not out of malice but from human error.
Professional indemnity insurance ensures that a builder is not financially punished for these mistakes.
Professional indemnity insurance is subject to some exclusions. These may change depending on the specific policy. Examples of typical exclusions may include:
The building sector comes with many litigation risks. Whether you are part of a small, medium or large construction firm, you may be held liable for financial losses as a result of a breach in your professional duties.
For instance, if a large building and construction firm is contracted by a developer to build an office building and in the process of completing this project, the firm hires a subcontractor to design the electrical system. The system proves faulty and the developer sues the firm for failing to deliver the project as promised. In this situation, the firm can seek cover from PI insurance.
For a builder or private contractor, a claim may arise if exceptional circumstances such as poor weather conditions prevent a contractor from complying with their professional duty to complete the project by the set deadline. Other claims may arise due to negligence, damaging documents and misleading conduct.
Learn more about the different types of professional indemnity insurance available
When choosing a professional indemnity insurance policy, builders must consider various factors. The first factor to consider is the insurance provider. Ideally, a builder should look to find a provider with previous experience in the construction industry.
Understanding the risks that are specific to your industry will help ensure the insurance provider covers all eventualities. A provider should also be chosen on the basis that they can provide adequate professional insurance for your business.
So do your research. Compare the cover offered by various providers to find out how comprehensive a policy is and then weigh up the costs.
Once you have chosen a provider, be sure to read the terms and conditions. Most business insurers will be able to tailor the policy to your needs.
Also consider your long term plans. As your business grows, you will need an insurance policy that can grow with you. Think about how your risks and circumstances may change and find an insurer who can provide professional indemnity insurance that accommodates your business plans.
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