Being an engineer comes with inherent risks because designers and builders bear a large portion of the responsibility for any issues or mishaps resulting from their work. Having comprehensive liability insurance is essential for self-employed engineers to safeguard their assets and means of subsistence in the event of an emergency. Insurance is something that many independent contractors ignore, but for engineers, it should be seen as a requirement rather than an extra.
In this topic will look at the main benefits of liability insurance for independent contractors in engineering, the risks they may encounter, and how having the correct insurance can give them peace of mind when they take on difficult projects. No engineer is exempt from potential liability claims in the wide range of engineering fields, from civil infrastructure to aerospace and beyond. Engineers who work for themselves can operate their businesses with confidence knowing they have a safety net in place if they take the necessary precautions, starting with getting the right insurance. Knowing the risks associated with liability and insurance coverage is a crucial first step for any engineer thinking about working for themselves before taking the plunge.
What is Liability Insurance?
Liability insurance policies cover policyholders’ legal responsibilities resulting from claims of loss events that happen because of their professional errors, negligence or failure to perform duties. For self-employed engineers, having liability insurance is vital because it covers the cost of legal fees, settlements and judgments against them if they are sued for losses or damages that happen because of their services. Without coverage, engineers must pay all these costs out-of-pocket which can easily reach hundreds of thousands of dollars depending on the severity of the incident. Just one major claim could permanently damage an engineer’s finances if they lack adequate liability limits.
Why Self-Employed Engineers Absolutely Need Liability Insurance
While some self-employed professionals can potentially get away with being underinsured, that is not the case for engineers. Nearly every engineering specialty comes with major liability hazards that could financially devastate uninsured engineers. Civil engineers may be sued if a structure they designed collapses or causes losses. Electrical engineers can face seven-figure lawsuits if electrical systems they engineer result in fires or cause physical accidents. Even lower risk specialties like software engineers create exposure since faulty code or glitches can potentially shut down operations or enable data breaches.
Additionally, local regulations often mandate minimum liability insurance coverage limits for licensed engineers which self-employed engineers must comply with. Uninsured or underinsured engineers may have licenses revoked or face sanctions and penalties for failing to carry state required coverages.
The bottom line is self-employed engineers face immense professional liability risks from their services. Without insurance, a single claim can permanently wipe out personal assets and bankrupt underprepared engineers. Liability insurance policies supply financial protection to guard against potentially catastrophic claims exposures.
Recommended Liability Insurance Policies
To secure adequate protection, self-employed engineers should carry both professional liability insurance and general liability insurance at minimum. Many engineers may also benefit by adding complementary coverages like data and privacy protection plans.
Professional Liability Insurance
Also known as errors and omissions (E&O) insurance, self-employed engineers need professional liability insurance as the foundation coverage. This type of policy covers financial losses that happen because of professional negligence, errors, or failure to perform duties resulting from engineering activities. For example, if a civil engineer makes an error during structural calculations for a commercial building which then suffers major collapse damage during operations, E&O insurance helps pay for repairs, legal claims from the building owner and other restoration expenses.
Professional liability insurance specifically covers the types of loss events engineers may cause while delivering their services. Policies offer coverage options with limits often starting at $1 million and going up from there. Costs vary based on factors like years experience, engineering specialty and coverage limit selections. Expect to invest around $2,000 per year for $1 million in professional liability coverage depending on risk factors. Higher coverage levels reaching $5 million can cost $5,000+ per year.
General Liability Insurance
While professional liability insurance covers engineers for professional errors and negligence, general liability protection covers claims for bodily injuries and property damage they or employees directly cause to others. For engineering consultants who visit clients sites to collect data, inspect structures or conduct land surveys, general liability is vital. Without it, clients can sue for medical bills, lost wages and other costs if an engineers actions directly cause them harm.
General liability insurance policies begin around $500 per year and provide coverage options with limits starting at $500,000 going up from there. For engineers that don’t visit client sites often, bare minimum limits may suffice. But those working in the field more regularly will require higher limits of $1 million or more.
Optional Coverages
Depending on their specialty and services, some self-employed engineers may benefit from other targeted liability insurance plans. For engineers handling sensitive data like prototypes or healthcare records, data and privacy protection coverage guards against claims related to breaches. Tech engineers can add protection against intellectual property infringement claims. Other coverage extensions handle losses from pollution incidents, employee dishonesty, equipment damages and more. Engineers should consult experienced insurance agents to discuss optimal coverage strategies for their niche
Steps to Getting Covered
To get properly insured as a self-employed engineer, you need to do some due diligence, but it tremendously pays off by supplying essential financial protection. Follow these steps:
- Research state, local and industry association insurance requirements for engineers to identify what policy types and limits to obtain. Also check which insurer partners meet qualifications.
- Use independent agents to shop multiple insurers for optimal coverage bundles and pricing leverage. Work with an agent to outline all services, risk factors and ideal coverage goals. Be transparent about all aspects that influence underwriting.
- Consider both annual term length plans for newer ventures as well as longer lasting multi-year policies that may cost more upfront but lock in lower rates for an extended period.
- Inspect all policy fine print closely and ask clarifying questions to rectify terminology concerns, exclusion gaps or uncertainty around claim scenarios. Don’t leave gray areas unaddressed.
The Bottom Line
Going without proper liability insurance poses overwhelming financial risk to self-employed engineers. Just one substantial lawsuit from errors, negligence or failure to perform duties can permanently damage engineers’ finances without adequate coverage. Do not take chances. Work with experienced agents to put robust professional liability insurance and general liability solutions in place right away after starting your own engineering consulting venture. Ongoing review of coverage adequacy is also essential as services evolve over time. With the right liability insurance portfolio secured, self-employed engineers gain invaluable peace of mind to focus fully on delivering optimal services for clients.
