trying to get an idea of insurance costs

[every dog has its day]

Hi, I'm a structural engineer running my own business (no other employees), I mostly work on infrastructure and residential buildings. I'm looking for insurance in case my designs fail, but am completely clueless about the costs (don't want to get scammed). What kind of price do people in my situation typically pay? Thanks.

 

[Ron]

Professional liability insurance is typically based on gross fees, though as you might already know, there is no relationship between fees and liability, except that the more fees you have usually means the more projects you have, thus more liability exposure.

You have to decide what level of coverage you want. Most small firms and individuals start at $250k or $500k. For that level of coverage and a reasonable deductible ($5k) you can probably get coverage for a few thousand a year.

Costs also fluctuate. As an example, 10 years ago I paid as high as $25k per year for a $1 million policy. It is now less than half of that. I've never had a claim, so that helps.

 

[Eric C.]

As Ron said, it will largely depend upon your yearly gross fees. It will also depend upon the specific nature of the work you do. There will be a couple of pages of questions when you apply asking for percentages of the each type of work you do that will aid the insurance company in calculating the premium.

Based on my experience working by myself and for myself you can expect a cost of approximately $3000.00 - $5000.00 per year but, again, it will depend on the nature and quantity of YOUR work.

 

[rb1957]

my experience also, E&O insurance is <$5k for $2m coverage ... like car insurance.

another day in paradise, or is paradise one day closer ?

 

[XR250]

Just renewed mine - 10k for 1M coverage, 600k billings,

 

[phamENG]

I had my policy written while I was just getting started part time. I wasn't expecting my evening and weekend activities to bring in more than $20k/year, so I got a $1M policy for less than $2k/year. I was wrong about my billings and had to quit my day job to keep up with my new and growing practice. Fortunately, my policy came with a 3 year rate lock. I'm not looking forward to the jump it's going to take after next year....

 

[WARose]

My coverage has fluctuated (between 0.5-2 million).....but the cost has typically been around 6k.

 

[Aesur]

I agree with what others have said, we just renewed ours and ours is in line with what others have said here, although we had to use a more expensive carrier because some of our projects required increased insurance in the 4 million range which was not offered by some of the cheaper providers.

There are other triggers that can increase costs as well; the biggest one (other than anticipated yearly billings and any claims on record) is the type of projects you do, ie if you do condo's you are putting yourself at much higher risk for claims (for some reason condos tend have more claims than other types of projects - maybe someone else can explain why that is) and this can increase your insurance costs significantly. Another factor is how many projects you have signed proposals on versus just an email or verbal go ahead. When starting out I believe the minimum yearly billings for carriers is around 250k a year so they will use that as your base and increase yearly based on projections created based on trendlines.

 

[dhengr]

Every dog has its day:
Structural engineers suck hind tit on fees, but they are right at the front of the line for deep pockets when it comes to litigation. I believe that they have about the worst pay-out record of all the parties involved in construction. If they have insur., they will be involved with anything that goes wrong. So many things, can be tangentially blamed on the structure and its performance, and you must defend yourself, even though it is finally proven to be another party’s fault. You are always being pressed to do twice as much, with less, and hurry up too (longer spans, fewer columns, crazy Arch. and Mech. details to work around, why so heavy, it well never see that much load, more complex codes, etc. etc.) by the owner, Arch., builder, all knowing they can fall back on your insur., or at least certainly want to involve it so as to distribute the final cost of settlement.

And, that condos cause insur. rate increases is not surprising from the insur. premium standpoint. You have one project, but 150 or 200 individual owners, each with a potential ax to grind, and willing to sue because they have been wronged. Someone else should be responsible for all their home owning problems, that’s why they didn’t buy a single family home in the first place. An apartment bldg. may have the same number of units, but only a limited, sometimes more sophisticated, ownership group, which at least vaguely understands that sht. rk. cracks do not mean the bldg. is going to fall down, and are probably not even the fault of the Structural Engineer.

I spent a good share of my time, during my engineering career, defending other engineers, archs, builders, etc., against this kind of crap. This is really good business for inexperience attorneys who bring these frivolous, uniformed suits, at least for their bank account. At worst, for them, they will win something, just to go away, since insur. companies understand that it gets expensive to fight to long and hard, once you have a fair lay-of-the-land or of the situation. I also spent considerable time working with attorneys for people who had legitimate claims for bldg./construction problems and poor engineering, arch. work, and construction workmanship.

Given the kinds of questions we are seeing here on E-Tips, and the apparent nature of the projects that the OP’ers. claim to be involved in, their general lack of real-world experience and engineering knowledge and background, and their lack of local mentoring or design oversight, it is hard to imagine that litigation or insur. premiums are going to go down.

 

[Tomfh]

Does anyone know the typical Loss Ratios for these types of indemnity products? I'm curious how much gets paid out. I understand in general insurance it's around 50%...

 

[SteelPE]

Given the kinds of questions we are seeing here on E-Tips, and the apparent nature of the projects that the OP’ers. claim to be involved in, their general lack of real-world experience and engineering knowledge and background, and their lack of local mentoring or design oversight, it is hard to imagine that litigation or insur. premiums are going to go down.

This description is me to a T.

When the old company I worked for was going out of business years ago (a construction company) I decided to go out on my own. I took over the PL insurance and just continued on with the contract. It was set up to be quoted every three years. Well, the first time around I never solicited any additional quotes thinking the company knew what it was doing. So, 4 years in I am up for renewal again, and their premium went through the roof. They wanted something like 10%-15% of my billings. I solicited quotes from other agents only to find out they had be "locked out" by my current agent (I was told a carrier will only provide a quote to one agent). I ended up trying ASCE who gave me a quote that was 1/3 of the quote I had originally received. Turns out my old company was never doing their homework and the person in charge of insurance was just getting insurance from his college buddy (and they still don't know why they went out of business).

When I kicked the original agent to the curb he was really mad at me, but in reality, he had been taking me to the woodshed for years and I should have been furious with him. He tried to scare me with stories about being sued and my premium going up as I was now having to renew every year vs every 3 years with his company. Ended up saving somewhere around $50,000 in the few years I have been away from this agent.

Long story short, get multiple quotes from agents and at the very least, solicit a quote from ASCE.

 

[Brad805]

Each year at our annual insurance conference the number one cause for claims is usually tracked down to junior personnel completing projects beyond their experience level or answering questions they should not be answering. Based on recent responses to RFI's, and shop drawing reviews it does not seem to be changing.