Do tradies need Professional Indemnity insurance?
Do tradies need professional indemnity insurance for their business? This depends on what business activities you are undertaking within this business. Most people don’t actually fully understand what professional indemnity insurance is designed to cover. Once we know the answer to this question than it’s much easier to determine if you’re asking yourself “do tradies need professional indemnity insurance?”
Professional Indemnity covers advice that you are providing which would cause a financial loss. The intention of a professional indemnity insurance policy was to cover an adviser or qualified professional to give instructions to a third party on how to repair a building, how to build a house to specific design requirements or signing off on the work of a tradesman. As businesses have developed and progressed you now find many business owners doing a wide range of activities that the need for Professional Indemnity insurance has increased to being needed by more and more business owners.
If you are only doing general trade work than there is a good chance that you do not need professional indemnity insurance. I say this cautiously because this is not a comment that should be taken generally. If you are providing any form of certification or compliance sign offs than yes, you do need professional indemnity insurance.
Are you designing and constructing? If so, you need a design and construct Professional Indemnity and Public Liability policy.
To make it even more difficult to answer whether you need professional indemnity insurance or not there are many more conditions that you need to consider. Most professional indemnity insurance for trade contractors will put exclusions in place that prevent you from providing the advice to a client and then also conducting the work related to this advice. If you are designing and constructing than you need a specific design and construct PI policy. Most insurers will put this exclusion in place because of their exposure to being recovered on. For example, if a trade contractor has constructed a roof and followed the design advice from an engineering company that designed the roof to meet cyclone standards. If the roofing contractor followed the design correctly than should a claim arise against the roofing contractor than their insurer would usually be able to recover these claim costs from the engineering company. If the roofing contractor offered a design service and then constructed to this design than should something occur, the roofing contractors insurer likely has no one else to recover costs from and the full claim costs would need to be paid from them.
If you find yourself searching online for an answer to “do tradies need professional indemnity insurance” what I would recommend is instead of typing this into Google open up your emails and send it to an insurance broker.
Information online about Professional Indemnity insurance is general only, seek personal advice to get the right information.
I’ve just explained the exact situation above that you are exposing yourself to. If you read articles online and then walk away going “I don’t think I need it” or “this doesn’t relate to me” or “I don’t do design work so I don’t need it”. If you decide this yourself and then a claim arises which would have been covered under a professional indemnity insurance policy than all you can do is kick yourself for not getting specific advice. If you at least contact an Insurance Broker you’ll have a 30 minute phone call or exchange a couple of emails and you will get an actual answer to your question “do tradies need professional indemnity insurance” that is tailored to your business.
Professional Indemnity insurance for tradies can be extremely beneficial to your business as claim costs continue to increase. Unfortunately, more often than not trade contractors only find out that they need an insurance policy is when a claim occurs. This usually turns into quite an expensive lesson.