A ubiquitous concern among architects who wish to start their own practice is "How much will my professional liability insurance cost?" Coverage costs vary by:
· State in which the practice is located,
· The limits of coverage purchased,
· Project types being designed, and
· The experience loss history of the Architect applying for coverage.
The cost of insurance also varies annually as the insurance market hardens or softens.
What should an architect expect upon applying for PLI (professional liability insurance) for the first time? Professional liability insurance protects firms against claims and/or allegations of negligence, errors or omissions in delivery of professional services. In order for an insurance company to evaluate and price their risk in insuring a firm, they require completion of an application. The application captures information about business locale, annual revenue, the discipline and project mix of the firm, and the risk management protocols implemented to help minimize exposure to claims. They will also inquire regarding claims history.
When in the process of starting a new firm, the underwriter will expect estimates of anticipated business. A solid business plan goes a long way in terms of providing underwriters comfort, so submitting a brief narrative stating goals and direction for the new firm is crucial. Previous project experience will also be highly relevant. In order to qualify for Architects Professional Liability insurance, you must hold a registered and/or licensed architectural license.
To get a quote, one must submit:
· A complete application. Be judicious, as submissions compiled hastily tend to be priced higher or declined by underwriters.
· A resume showing representative projects, education and any Society/Association affiliations held. Associations convey professional commitment to the insurer. Engagement in continuing education has a similar effect.
· A mission statement including the direction intended for the business goals for growth.
Once committed to purchasing a policy, annual renewal will be necessary to maintain coverage on work performed under the new firm. Professional liability insurance is written on a "claims-made" basis. This means a policy must be in force at the time a claim is made in order for coverage to apply. Also all policies contain a "retroactive date", which is the inception date of the initial professional liability insurance policy.
It is not possible to get coverage for work that you performed before applying for professional liability insurance. In essence, the key to covering architectural professional liability is to purchase from a trustworthy provider, and to do so immediately upon inception of a practice.