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Why it pays to have architects’ PI run-off cover

07/03/2016

Architects' PI run-off cover protects your past work once you've stopped trading.

To paraphrase a wise man, it’s not a building's beauty you should look at, it’s how it's made. That's what stands the test of time.

If you’re an architect or a professional working in the construction industry, this will probably ring very true.

But sadly, not all buildings last. Cracks appear, materials deteriorate, flaws rear their ugly heads.

Often, it can take years for problems to emerge But sadly, when they do, it'll be the person who did the work that has to answer the awkward questions. Particularly if it's proven the problems could've (should've) been avoided.

Claim game

When things go wrong and a professional person is culpable, a claim is usually made against that person pretty soon after what happened, happened.

That's not usually a problem. If you're still actively running your business your professional indemnity (PI) insurance will protect you.

But research also shows that over 40% of claims take up to three years to be filed. Sometimes longer. So, if you’ve cancelled your policy because you're retired or moved on, it could spell trouble.

That's because PI insurance is a 'claims made' policy.  In simple terms, to be covered, your insurance has to be running when you did the work and when the claim is made. If you cancel your insurance after finishing a project, your work on that project (and any other) isn't protected.

Architects' PI run-off cover to the rescue

So what can you do to protect yourself?

The answer is something called run-off cover. In this case, architects' PI run-off cover.

It’s an add-on to your existing PI insurance and comes into play when you're no longer trading. Say you close your business, retire, or join an architects' practice as an employee.

Its job is, specifically, to cover claims made against you for work you did in the past.

Why should you keep paying for cover?

The short answer is because there's still risk there. It doesn't stop just because you have. The work you did on that supermarket project, say, could be around for years – long after you've said cheerio to the nine-to-five. And if something goes wrong with it, you're still liable.

The money you continue to pay for architects' PI run-off cover means that it'll be able to help if there's a claim against you. That might jar a little at first because you’re not actually seeing anything in return – you’re paying for work you're already done and that was insured at the time.

But if you look at it from the insurer's point of view, it has to charge something. Otherwise, it's looking at covering £millions worth of risk without getting any money back to pay potential losses. Multiply that by however many thousands of policyholders it has and that's a business model that very quickly doesn't add up.

However, to reflect the fact that risk does reduce over time, there's good news in that what you pay reduces too. Obviously, this reduction depends on your insurer and the nature of the work you did, but you'll probably be looking at around 10% every year. This continues until you hit the insurer's minimum premium.

Given the possible consequences of not having cover at all, we'd say that makes it pretty good value.

If you need more info on architects' PI run-off cover, give us a call on 0345 222 5391 or click here.

Image used under license from Shutterstock.

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