Finding the right insurance for your electrical engineering business is important in protecting your business and achieving long-term success.
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Few businesses relish the possibility of a lawsuit. They can drag on for months or years, costing you thousands in legal fees even if you are found innocent. In order to better protect your firm from lawsuits relating to your professional work, consider purchasing a comprehensive business insurance plan. Even without a lawsuit, your business could still face financial danger. In the event of a natural disaster or employee accident, you’ll want to be appropriately covered. Business insurance could be a good fit for your engineering firm if:
- You would like to insure your services and practice against claims of poor performance or errors in your work
- You employ others
- You provide benefits to your employees like health insurance or a 401(k)
- You work in an office that you lease or own and store valuable equipment or property in that office
- Clients or vendors visit your office
What insurance coverage do I need as an electrical engineer?
While many businesses will need basic coverage like general liability insurance, companies that offer services or advice will generally need to obtain professional liability insurance. For engineering firms, this coverage is particularly important as lawsuits are quite common when it comes to design work. Below we explain some of the more common business insurance coverages that electrical engineers should consider.
Professional Liability Insurance
As an electrical engineer, your work impacts the viability of the products and safety of buildings you are responsible for. Professional failure on your part can create serious hazards or project setbacks and result in financial liability. Moreover, even if you perform your job correctly, you can still be sued. Professional liability insurance, also known as errors & omissions insurance, can protect you from potential client lawsuits stemming from the performance of your professional work. Professional liability insurance is one of the most important coverages an electrical engineer can obtain, as they are highly susceptible to these claims. Covered areas for professional liability insurance include negligence, misleading statements, performance, and breach of duty.
- Errors/Negligence: You design a sensor meant to be used to monitor the emergency response system of an office building. The sensor you made malfunctions multiple times, resulting in physical injury. The company that hired you wants to sue your firm for negligence.
- Performance: Your firm is hired to help develop a new local power plant. Because of a paperwork mixup, your team misses a critical deadline to get plan approvals from the city. Plant construction is delayed by two weeks, costing the power company hundreds of thousands of dollars.
General Liability Insurance
General liability insurance, or commercial general liability, can protect your business from lawsuits claiming property damage or bodily injury caused by your business or your employees. This is an important coverage for any business, as no matter how careful we are, accidents can happen and cause damage to others. The four types of coverage included in general liability insurance are: products & completed operations, property damage, bodily injury, and personal & advertising injury.
- Property damage: A fire starts in your office’s storage room and spreads to a neighboring coffee shop. The fire destroys the coffee shop, including all of the furniture and equipment. General liability insurance would cover the damage to your neighbor’s property.
- Bodily injury: The founder of a battery tech startup comes in to see if you can help design a new energy storage facility they are building in Nevada. A janitor is mopping the floor outside your office and uses an excessive amount of water. As the founder is exiting your office, he is totally absorbed in his phone and fails to notice the puddle of water in front of him. He slips and breaks his collarbone. He opts to sue you for bodily injury.
Workers’ Compensation Insurance
If an employee at your company suffers a work-related injury or illness, workers’ compensation insurance, commonly known as workers’ comp, would be able to provide financial benefits to help cover medical expenses, lost wages, and more. Workers’ comp is a critical coverage that is almost always required if your company has employees that are not owners or partners in the business. In exchange for accepting workers’ comp benefits, an injured employee agrees to not sue your business over the injury. Workers’ compensation insurance is no-fault, which means that it pays benefits regardless of whether the employer or employee is at fault for the injury.
Workers’ compensation can cover the costs of:
- Funeral expenses
- Disability benefits
- Medical expenses
- Rehabilitation costs
- Death benefits
- A portion of lost wages
- One of your engineers is working on a circuit board with a soldering iron. He is startled when a coworker enters the shop, and the engineer accidentally burns his arm. He must go to the hospital to receive treatment for second degree burns. Workers’ compensation covers the cost of his hospital visit, as well as a portion of the income he lost during the two days he was in the hospital.
Commercial Property Insurance
Commercial property insurance aims to protect the investment you’ve made in your business property, including the buildings that your business operates out of, as well as any tools, equipment, furniture, or other property relevant to your business. Coverage includes the buildings themselves, the contents of those buildings, and the property of others in your care. Commonly covered perils include fire, lightning, explosion, windstorm, hail, theft, and vandalism.
- Buildings: Your firm operates out of an office building that you own. One night, a group of local teen vandals decide to throw rocks at your building as some sort of prank. They break 5 windows in the process. You must pay to have the windows repaired.
- Contents: You have a collection of prototypes that you have invested a significant amount of time and money into. The day before you are set to present them to the client, a fire breaks out in your office and the prototypes are destroyed. You must postpone the meeting, work overtime, and purchase new supplies to recreate the prototypes.
Commercial Auto Insurance
Your company likely owns or leases one or more vehicles to visit worksites or client offices. In the event of an accident involving your vehicles, commercial auto insurance can provide financial protection. This type of insurance has both liability and property components. The liability component protects your business if one of your workers is at fault for causing a crash and causes bodily injury or damages someone else’s vehicle or property. The property component of commercial auto insurance protects the value of your vehicle against crashes, theft, and other perils. Importantly, commercial auto insurance also provides protection for vehicles owned personally but used for certain business purposes.
- Your firm is tasked with installing new power lines in southern Los Angeles. One of your engineers must visit the work site, which is 50 miles away from your office. He borrows the company car, but gets misdirected while trying to find the worksite and accidentally reverses it into a neighbor’s fence. You must pay to repair the cost of the fence.
Business Owner’s Policy
A business owner’s policy, also known as a “BOP,” is a special bundling of policies that can provide coverage for risks that are common to small business owners. BOPs combine property, general liability, and business income and extra expense insurance coverages for qualified small businesses. Importantly, a business owner’s policy can help you save money, with lower premiums than buying the individual coverages separately.
As an electrical engineer, you may be more exposed to certain risks than other businesses. Because of the intricate and complex nature of your work, just one small mistake could have a serious impact on a client’s business and ultimately lead to a crippling lawsuit. Furthermore, simply running a business can expose you to a variety of liabilities. Whether it is a natural disaster or an employee accident, unfortunate events can and do happen. . One of the best ways to ensure the financial security of your business is to invest in business insurance. While policies like commercial property and general liability insurance can protect you from the unexpected dangers that all businesses face, policies like professional liability insurance can protect you financially in the face of lawsuits alleging errors or mistakes in your professional work.