Building design insurance protects your business if it is sued by an unhappy client or another third-party.
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Having the responsibility for this important work opens your business up to the threat of lawsuits in the event that something unexpectedly goes wrong as a result of your firm’s work. Your building design business also faces the same exposure to accidents that are common to all businesses.
When purchasing insurance for your building design firm, your business signs a contract and also makes a payment to the insurer. In exchange for this payment, which is also called a premium, the insurance company will protect your firm from financial losses caused by certain types of events specified by the insurance contract.
Building design professionals have a variety of insurance concerns, so read below to see what insurance you need as a business owner to protect your company and your employees.
Types of Building Design Insurance
Professional Liability Insurance (sometimes also called Errors & Omissions Insurance) protects architecture and engineering firms that provide professional services from liability claims. If your firm is sued by an unsatisfied client for making mistakes in your work or costing the client money, this insurance will help cover the costs of any settlement and legal fees. You may be sued by a client even if your firm is not at fault, so having this insurance coverage will help to protect your firm financially.
Professional liability insurance is one of the most important types of insurance coverage for a building design firm. Having this insurance coverage can protect your business from the financial repercussions of lawsuits against your company.
Example: Your firm is hired by a client to create a design. Due to a misinterpretation, the design doesn’t meet the client’s expectations, but this is not discovered until the design is used in building. The client sues your business for damages.
General liability insurance protects insured architects and engineers from claims such as personal injury, client injury, and accidental property damage. Since you can’t guarantee how careful people will be on job sites, having this insurance protects you and your business against lawsuits from clients or third parties.
If you host clients at your office, this insurance can protect your business if someone is injured while on your office premises. Additionally, if you visit client sites, general liability insurance can protect your business if you accidentally cause damage to another party’s property.
General liability insurance doesn’t provide coverage for liability caused by the practice of building design, and auto-related liability is also generally excluded.
Example: A visitor to your office trips and falls over a piece of loose carpet. The visitor sues your business for damages.
Property Insurance covers business property that is stored in your office or other covered business locations. Examples of items that property insurance can cover include computers, servers, drafting equipment, specialized engineering equipment, furniture, and artwork. Property insurance can provide protection from damage caused by fires, windstorms, water damage from burst pipes, vandalism, and many other hazards. Additionally, most policies provide limited coverage for assets that are temporarily held off-site for business use.
For building design firms that rent their business premises, property insurance may be required by your landlord if it is specified in your commercial lease. If your business owns your office building, property insurance can also provide protection for damage or destruction of the building itself.
Example: A fire starts in your office kitchen and burns the entire building. All of your furnishings, computers, and other business property is destroyed. Property insurance would help pay for the cost to replace this property.
The Business Owner’s Policy combines property and general liability insurance coverages for qualified small businesses. By combining these coverages together, your building design firm can save on premiums, as there may be discounts available for bundled policies.
Workers’ Compensation Insurance covers medical expenses and lost wages for workers who suffer from a work-related injury or illness. Workers’ compensation covers accidents that may seem common, such as falling while on a client site or developing carpal tunnel from computer use.
Different states have different requirements for workers’ compensation coverage, so you’ll want to make sure your business is compliant with local and state regulations, but this coverage is required in almost all states if your business hires employees.
Building design professionals who work on client job sites also need to take into consideration the additional complications posed by job sites with heavy machinery and outdoor work. While no one wants to imagine a scenario where workers are harmed, having full coverage insurance gives you peace of mind.
Example: An engineer at your company is visiting a client’s manufacturing facility. While walking through the factory, he trips over improperly stored materials and breaks his hip. Workers’ compensation insurance covers to cost of his medical bills, rehabilitation, and partial lost wages.
Other Types of Building Design Insurance
In addition to the core insurance coverages listed above, we also cover other types of business insurance that may be useful depending on the circumstances of your building design firm.
Data Breach/Cyber Liability Insurance can help you pay for the costs to recover if your company is hacked or suffers a data breach. Your company may store business data and confidential information, including everything from employee health and personal information to proprietary information such as blueprints or loan information belonging to other third parties. Furthermore, smaller companies are often seen as lucrative targets for hackers because they are assumed to have fewer protections in place.
Depending on the information stolen, you can have reputational loss, legal fees, and judgments to pay. Your company may also need to spend extra money on public relations or provide free credit monitoring to help restore trust if customer information is lost. Cyber liability insurance helps assess the risk your company is under and covers fees in the event of a breach.
Commercial Auto Insurance covers you and your employees in the event of a crash when you are driving cars that are owned by the company. It also provides optional coverage for the value of the vehicle in the event of a crash or theft.
Additionally, with job site and client visits, you and your employees may be on the road in personal cars. By purchasing hired and non-owned commercial auto insurance, your business will be covered when employees drive their personal cars for work. Since business owners have no control over what personal auto insurance employees carry, having a commercial policy means that everyone is covered to the same degree. Therefore, there is no risk of an employee’s personal auto insurance denying a claim that occurred on company business.
Umbrella Insurance protects your business from expensive bodily injury or property damage liability claims that exceed the limits of your general liability or auto liability policy.
As your business grows and you bid on new business, you may notice that you are required by some clients to carry umbrella insurance. A typical general liability insurance policy may cover up to $1 million, but many contracts, especially government clients, require at least $2 million in coverage. Umbrella insurance helps bridge that gap.
Insurance coverage for your employees
In addition to the company coverages covered above, your building design firm can sponsor group insurance plans for your employees. By sponsoring these plans, your firm can provide employee benefits to your employees that promote employee happiness, wellness, and retention.
Group Health Insurance is a huge selling point for any business, and good insurance can make you more attractive as an employer, helping you draw in and retain talent.
Health insurance covers basic care like doctor visits, wellness exams, and prescriptions all the way up to surgery, prenatal and delivery care, and more. Dental and vision policies can usually be added as additional optional coverages.
Coverage can also be extended to family members, meaning that a small business may insure far more people than it employs. Having a good health insurance policy pays dividends in employee wellness by encouraging employees to see the doctor when they are sick, go for wellness checks, and put more thought into how they care for their bodies. As an employer, you are in a position to offer insurance that greatly improves your employees’ lives.
Group Life Insurance provides a financial benefit for survivors if an employee dies unexpectedly. The employee’s death does not have to be work-related for coverage to apply. Although your employees can also buy life insurance on the personal life insurance market, rates under a group life insurance plan are generally lower than the prices for personal policies.
Employers typically purchase a set amount of life insurance for their employees, which is commonly a multiple of the employee’s annual salary. Many employers also allow their employees to purchase additional insurance through payroll deductions.
Group Disability Insurance provides income for employees who are temporarily or permanently disabled from an injury that is not work-related. Disability insurance is a legal requirement for employers in many states.
Disability insurance is always more expensive on an individual policy than for a group one, so much like group life insurance, group disability insurance makes for an attractive part of an employee benefits package. Disability insurance can be divided into two basic categories:
- Short-term disability: this is limited insurance used to replace wages for employees unable to work for a short term, such as those recovering from surgery or those requiring time off for mental health.
- Long-term disability: this insurance covers longer recovery with an emphasis on returning to work and minimizing lost wages, while still providing the employee with enough coverage to pay bills. Usually, insurance offers a percentage of wages over a longer term combined with positive reinforcement like rehabilitation programs and career counseling.
Who needs Building Design Insurance?
All types of building design firms should purchase insurance, whether they are single-person shops or multinational firms with thousands of employees. Business insurance can provide financial protection for your business from unexpected or unfortunate events that you cannot prevent. Having insurance coverage also helps you win new business, showing that your organization is legitimate and responsible.
You should consider purchasing insurance for your building design firm if any of the following apply:
- You do work for clients that creates professional liability
- You have employees that work for your firm
- You own valuable items titled in the business name, including artwork, furniture, specialized equipment, or computers
- You store confidential digital data about clients, individuals, employees, or others
- Your firm owns vehicles titled in the business name
Building Design Insurance can cover professionals in a wide variety of trades. Some common trades that need Building Design Insurance include:
Having insurance for your building design firm is an investment in the future success of your business. Without insurance coverage, your livelihood and business assets may all be at risk.