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If you’ve ever signed a lease agreement or business contract, you might have come across the term “waiver of subrogation.” When engaging with a landlord, client, or business partner, the other party may request for you to include this technical-sounding term in your insurance policy. In this article, we’ll explain what “waiver of subrogation” means, the implications of including this waiver in your insurance, and how to get a waiver of subrogation endorsement in your policy.

What is a Waiver of Subrogation endorsement?

The meaning of subrogation:

To understand what a waiver of subrogation is, it’s probably best to start by explaining what subrogation is in the first place. In law, subrogation means the right of one party to substitute the position of another party (“stepping into another person’s shoes”, in layman’s terms).

When it comes to insurance, subrogation is the legal ability for an insurance company to sue another party that caused you to suffer an insurance loss. The insurance company will “step into your shoes”, and then sue the other party to reclaim damages that your insurance company had to pay out.

The meaning of endorsement:

In insurance, an endorsement is simply a modification to your policy. Since insurance policies are legal contracts between your company and the insurer, the insurer cannot simply erase or edit parts of the original contract document. Instead, if changes are made, it will issue another document (the “endorsement”), to state the exact policy changes, and when precisely these changes will take effect.

Subrogation example 1:

For instance, let’s say that while driving, another driver hits your car. Your car is damaged. Your motor insurance company will first compensate you for your loss. Your motor insurance company will then sue the other driver to recoup the claims that they paid to you. Since all drivers must have motor insurance in Singapore, your motor insurance company will likely initiate legal action directly against the other driver’s insurance company.

Subrogation example 2:

Another common scenario where subrogation is commonly carried out is in landlord-tenant relationships. Let’s say that you rent a shop space. The landlord did not carry out proper maintenance of the electrical sockets, causing a fire to break out in the building. The landlord’s premises, and your shop, are destroyed. You file a fire insurance claim with your insurance company for the losses you have sustained. Your insurer compensates you.

Your insurer then assumes your legal persona (i.e. “steps into your shoes”), and sues the landlord for negligence to recoup the claims paid out to you.

The meaning of a waiver of subrogation endorsement:

Now that we’ve established what subrogation means, it’s much easier to understand what a waiver of subrogation means. Since subrogation refers to the right of an insurer to sue another party to recover their losses, a waiver of subrogation simply means that you give up this right to allow your insurance company to sue other parties that caused you to suffer losses.

Let’s look back at our earlier example of the fire in the retail shop (subrogation example 2), to see how a waiver of subrogation endorsement would have affected the outcome scenario. Let’s assume that you had a signed a waiver of subrogation endorsement in your fire insurance policy. This waiver of subrogation endorsement names the landlord, thus waiving your insurer’s right to subrogation against the landlord. Because you had agreed to a waiver of subrogation endorsement in your fire insurance, your insurance company cannot sue the landlord for negligence in causing the fire.

Do Waiver of Subrogation endorsements cost extra money?

Some insurance brokers may charge you a small admin fee to include waivers of subrogation endorsements. Some may even decline to offer this service, as it’s extra work for them. However, Provide offers waivers of subrogation endorsements at no extra charge.

How Waiver of Subrogation endorsements work across various types of insurance

Waivers of subrogation endorsements are often used in commercial property insurance, and public liability insurance.

Waivers in Commercial Property Insurance

Landlords will often request their tenants to carry Commercial Property Insurance (also commonly known as Property All Risks Insurance/Industrial All Risks Insurance). Additionally, landlords will also typically ask their tenants to include a waiver of subrogation endorsement in their Commercial Property Insurance policy. This is meant to protect the landlord against lawsuits from their tenant’s insurance companies. Such protection is most relevant in case the landlord commits acts of negligence that end up damaging their tenant’s property. For instance, let’s say the landlord contracts a plumber to perform regular servicing on the building’s water pipes and bathrooms. The plumber accidentally causes a pipe to burst, causing major flooding throughout the building. This ends up causing severe water damage to the landlord’s building, and also damage to all the property belonging to the tenants in the building. If the tenants did not have a waiver of subrogation endorsement that named their landlord, it is likely that the tentant’s insurers will sue the landlord. The insurers will use this lawsuit to recover the claims they paid out to the tenants.

If you’re a tenant, do consider negotiating with your landlord to include mutual waivers of subrogation endorsements. This protects you against lawsuits from your landlord’s insurance company if you’re found to be negligent in causing property damage.

Waivers in Public Liability Insurance

Waivers of subrogation endorsements are commonly requested in Public Liability Insurance, particularly when you’re working with large companies. This is meant to protect the company from lawsuits from your insurance company, should the other party be found to be negligent.

Common examples where waivers of subrogation endorsements are useful are in cases of personal injury or property damage. For instance, let’s say you take up an engineering project at a shipyard. The shipyard will commonly require you to carry Public Liability Insurance. The shipyard will also commonly require you to include a Waiver of Subrogation endorsement, so that your insurer cannot sue the shipyard owners. If the shipyard owners are negligent (e.g. improper maintenance of cranes at the shipyard causes an accident injuring your employees), then the waiver of subrogation will protect the shipyard from lawsuits filed by your insurers.

What are the main types of Subrogation Waiver endorsements?

There are two types of waiver endorsements used on liability policies: scheduled endorsements, and blanket endorsements.

• A scheduled endorsement will specify a list of names. The insurer will not sue the parties that have been explicitly named in the endorsement, if you have waived your rights of subrogation against them.
• A blanket endorsement does not specify a list of names, and affords broader coverage. Blanket endorsements typically state that if you have agreed in a contract to waive your rights to sue someone, the insurer will not sue them. Blanket endorsements are helpful if you have many clients that require waivers of subrogation. It is much more convenient to have a blanket cover, which saves you from the trouble of having to add a new endorsement each time a client requests for it.

Key takeaways on Waivers of Subrogation:

• A waiver of subrogation prevents an insurance company from suing a 3rd-party to recover claim amounts that they have paid out.
• If you negligently cause a 3rd-party to suffer losses, the 3rd-party’s insurance company can sue you to recover the claims they paid out.
• When entering into a contract, both parties can consider mutually waiving their rights to subrogation. This can be helpful in reducing liability risks, if one party ends up negligently causing losses to the other party. Always consult a legal professional or qualified insurance professional before making any such decisions.

If you run a renovation or construction company, you might have come across two types of liability insurance: Public Liability Insurance, and Contractors All Risk Insurance. Have you wondered what the differences are between Public Liability Insurance vs Contractor All Risk Insurance? You’ve probably encountered contracts that required you to show proof of Public Liability Insurance, and went ahead to purchase that type of coverage. However, did you know that Contractors All Risk Insurance actually includes Public Liability coverage? Furthermore, did you know that Contractors All Risk Insurance is generally a better option for renovation contractors and construction firms? In this guide, we break down a list of specific differences between the two. This will help you better understand which type of insurance is best suited for your needs, and whether you have any potential gaps in your coverage.

Difference 1: Only Contractors All Risk insurance covers damage to contract works due to major risks like fire, explosions, lightning, water damage, and more. Public Liability Insurance does not cover such damage.

This is a major difference between Public Liability Insurance vs Contractor All Risk Insurance. Public Liability Insurance does not cover property under care, custody and control. As such, any damage to your client’s property is not covered. For instance, let’s say a major fire erupts at a building you’re performing renovation or construction works on, and the cause of this fire was not your fault. Since the majority of contracts will only pay you in stages (e.g. 20% down payment, 20% upon Phase 1 completion, and so on), you could be left with losses. Contractors All Risk Insurance would cover the cost of the damage, and therefore help you to recoup the cost of any investments you’ve made into the project.

This is a really important point to consider because contract works are exposed to a significant variety of risks with a razor risks from the weather or from machinery for natural disasters or many other kinds of risks and so it is vital that companies protect the work that they are developing adequately.

Difference 2: Coverage for damage to client’s property due to contractor’s mistakes/negligence

This is another one of the major differences between Public Liability Insurance vs Contractor All Risk insurance. Contractors All Risk Insurance protects you against liability if you negligently damage your client’s property due to your own mistakes. For instance,  let’s say you are working on a renovation project in a client’s house. While performing your renovation works you accidentally damaged your clients ceiling. Your client files a lawsuit against you, demanding compensation for the damage that you caused. Public Liability Insurance would not protect you in this scenario. Since the property was under your care, custody and control (i.e. you were working on it), you would not be covered for the lawsuit. In this scenario, only Contractors All Risk Insurance would cover you. This is a very important point, because many business owners operate under the mistaken assumption that Public Liability insurance covers them against liability for property damage under all circumstances. This is not true.

If you perform any kind of physical work that involves property belonging to someone else, then it is vital that you carry Contractors All Risk Insurance. Public Liability Insurance alone is insufficient. 

Difference 3: Coverage for contractor’s machinery and equipment

Public Liability Insurance only covers your liability to third-parties, and so damage to any equipment and machinery that you use is not covered. Contractors All Risk Insurance, being designed specifically for contracting companies, will cover damage or loss to machinery and equipment that is being used for your contracting work. This is an excellent point of coverage, since contracting machinery and equipment may frequently get damaged while being used for projects. 

Contractors All Risk Insurance also includes coverage for testing machinery and equipment. Before you set out on a project, you may need to conduct tests to ensure that all your equipment is functioning properly. A Contractors All Risk policy would cover any damage to your equipment during testing, and also any potential liability from property damage or injuries during such a period. Coverage for testing is time-limited, and the specific duration depends on your policy. For smaller contractors and construction companies, the testing period cover usually lasts for 2 weeks before the commencement of each project. For larger companies that have more equipment (and also more complex machinery to deploy), the testing period cover can be extended by several weeks to allow adequate pre-construction checks to be performed.

Difference 4: Coverage for hot works/welding

Most standard Public Liability Insurance policies usually carry a hot works/welding exclusion. This means that any liability (e.g. from property damage or injuries) stemming from hot works that you perform will not be covered. Now, hot works are a particularly dangerous activity that have a high chance of causing property damage or injuries to third-parties. If you perform any kind of hot works, this can leave you dangerously exposed to liability. 

Contractors All Risk Insurance, on the other hand, does cover liability arising from hot works. This would protect you in case you cause property damage or injuries while welding. For instance, if one of your employees was performing arc welding, and the sparks burnt a passerby, you can be sued for causing personal injury. A Contractor’s All Risk policy would be activated in such a scenario to pay for lawyer’s fees to defend you, and also to cover any potential settlement costs you might have to bear. 

Difference 5: Coverage for piling and excavations works

Piling and excavation works are particularly dangerous to your client’s property, and to surrounding buildings. Such works have a high chance of causing damage to underground pipes and cables. Piling and excavation may also cause subsidence or the surrounding ground to weaken, which may damage the integrity of nearby structures. If such damage were to occur, the owners of nearby buildings would certainly hold you legally liable for the damage you caused to their structures.

Public Liability Insurance policies typically do not cover piling and excavation works. However, Contractors All Risk Insurance does cover such high-risk work. If you were sued for causing damage to surrounding buildings due to piling and excavation work, Contractors All Risk Insurance would protect you by paying for your defense fees and damages awarded against you.

Difference 6: Coverage for damage to equipment and supplies being shipped to work sites

Contractors All Risk Insurance can be extended to include inland transit and marine cargo coverage. Usually, companies will have to purchase separate insurance policies to specifically cover their equipment, machinery, inventory, and supplies that are being shipped to the work site. For instance, if you are transporting machinery and building supplies from Jurong to Changi for a construction project, you’ll want to have an Inland Transit Insurance policy to cover any potential damage to your machinery and supplies while on the road. (Note: Be aware that a “Property/Industrial All Risks” policy, which covers damage to property/equipment you own, does not cover insured property or equipment when it’s being transported around. It only covers property/equipment kept in the insured premises.). If you’re shipping supplies (e.g. concrete) and equipment (e.g. power tools) into Singapore from overseas, you’ll need to have Marine Cargo Insurance to protect you in case the supplies or equipment get damaged or lost while on their way here.

The great thing about Contractors All Risk Insurance is that if you want to insure equipment and supplies while they’re being transported, you actually don’t need to maintain a separate Inland Transit or Marine Cargo policy. You can simply include Inland Transit and Marine Cargo cover as extensions under your Contractors All Risk policy. Here are some key items that can be insured for loss/damage while being transported, under a Contractors All Risk policy:

• Machinery & Equipment: Excavators, cranes, piling machines, welding tools, power tools, grinders, etc.
• Supplies: Concrete, steel re-bar, H-beams, bricks, wood, steel, stone, etc.

This way, you don’t have to bother with the hassle of multiple policies. Just carry one Contractors All Risk policy, and you’re good to go.

Difference 7: Coverage for architects’, surveyors’ and consulting engineers’ fees 

In the event that you cause property damage, you may need to engage architects, surveyors, and consulting engineers. This is particularly true if the damage that you caused to the building was especially severe. For instance, let’s say that an explosion occurs in a building you’re working on, causing a large portion of the structure you were to collapse. You would need to hire architects, surveyors, and engineers to provide their professional opinion on how best to reconstruct the collapsed portion of the building. You’d need to engage an architect to ensure the reconstructed portion is designed the same way as the rest of the building. You would need a surveyor to ensure , and engineers to ensure that your construction work is mechanically sound. Hiring all these professionals doesn’t come cheap, and could easily set you back tens of thousands (for the smallest of projects) to hundreds of thousands (for larger projects). 

A Contractors All Risk Insurance policy can be structured to include this coverage as an extension of cover. This way, you won’t be caught off guard by having to fork out expensive professional fees in the event that you need to rectify property damage.

Public Liability Insurance vs Contractor All Risk Insurance: which is best for me?

Where can I buy Public Liability Insurance and Contractors All Risk Insurance?

You can buy Public Liability Insurance online here. You can get an online quote within 3 minutes, and can purchase up to $2 million in coverage, which is a high limit. $250,000 Public Liability coverage starts from just $100 a year – highly affordable rates which are specially crafted for SME owners.

You can purchase Contractors All Risk Insurance here. Provide is one of the leading providers of Contractors All Risk Insurance. We’ve survived numerous renovation contractors and construction companies who trust us to protect their business against liability.

You cannot buy stand-alone business interruption insurance, because this type of cover is always tied to a commercial property insurance policy. You can think of business interruption insurance as a rider on top of commercial property coverage.

To understand why business interruption insurance cannot be purchased on its own, let’s first understand how coverage actually works for a business interruption policy.

Business interruption insurance is most frequently activated when a business owner suffers property damage at their business premises, and can’t operate their business normally. This could be the result of a fire, explosion, water leakage, flood, or some other major risk that’s struck and affected the company. For instance, let’s say you run a restaurant. There’s a massive fire in the kitchen from a gas leak which destroys your entire premises. In such a scenario, you’re going to need compensation to rebuild your property. On top of that, you’re also going to need business interruption benefits to help with the costs of keeping your company afloat. Since you won’t be generating revenue, you’ll need financial assistance to continue paying your staff their salaries, paying your landlord the rent, paying your suppliers for purchased inventory, and paying off many other miscellaneous expenses. Business interruption insurance takes care of all that for you.

When you encounter such an incident that requires business interruption coverage, it’s probably also going to require you to activate property damage cover. This is why commercial property insurance is always bundled together with business interruption insurance. Since both these covers are always bundled, you’ll find that business interruption insurance is commonly found as “Section 2” inside a commercial property insurance policy. “Section 1” is the commercial property cover itself.

How would a business interruption insurance policy work together with commercial property insurance to protect me?

Let’s look at an example to illustrate how a business interruption policy would protect your company.

A metal manufacturer suffered a fire at its factory. The manufacturer was forced to shut down its factory for 3 months to conduct repairs. The manufacturer had to hire a firm to clear a massive mound of post-fire debris that was left behind – burnt walls, destroyed equipment, burnt product, and more. During the 3 months that the factory was shut down, the manufacturer lost 25% of its revenue as it was unable to fulfill contract orders. The company also had pay its staff overtime to deal with the crisis.

Here are the costs that a commercial property insurance policy, with a business interruption policy, would pay for:

1. Burnt down factory: Pay the costs to rebuild the factory to its original condition before the fire
2. Lost equipment and inventory: Pay the costs to replace equipment (or repair if possible), and costs to replace the lost inventory
3. Massive debris: Pay the costs to clear the debris so that rebuilding work can begin. This is often a very significant cost and will form a large percentage of the claim amount. A small retail shop fire could cost $20,000-$30,000 in debris removal alone! Removing debris from large factories could cost hundreds of thousands (or even millions). Business owners who have suffered a fire loss are usually surprised at just how much debris removal costs!
4. Lost revenue/contracts: Pay the costs for lost revenue. Note: The exact costs that the business interruption policy would pay for will depend on the type of loss that you choose to cover. For instance, business interruption policies can cover lost revenue, lost gross profit, or loss net profit. The most common type of cover is for lost gross profit.
5. Staff overtime: Pay the costs for staff overtime wages, and also additional staff that may be hired to help the business get back on track

I still want to buy stand-alone business interruption insurance. Is there really no alternative?

You’ll need to purchase commercial property insurance together with business interruption insurance. It does not make business sense for an insurance company, from either a risk-management or underwriting perspective, to offer stand-alone business interruption insurance.

That said, you shouldn’t be put off by the potential cost of purchasing commercial property cover. Commercial property coverage is affordable – especially so when you get it from Provide. Our commercial property insurance starts from just $9/month for $100,000 in coverage, and can be easily adjusted upwards for greater coverage needs (we can assist you with up to $250 million in coverage for each property you have, which is quite a staggering amount of protection).

Where should I get business interruption insurance for my company?

Our business interruption insurance is priced at very affordable rates. For example, we offer $20,000 in business interruption insurance (e.g. for a typical professional service firm, like an Accountant), for just $3/month. This means that business interruption insurance for the vast majority of companies is highly affordable.

A common question that business owners have is whether their business interruption insurance will cover power outages. The quick answer is yes, but it’s important to identify the cause of the power outage to ensure that coverage will apply. Most business interruption policies will only cover power outages caused by utility companies suffering some kind of property damage at their power generation facilities. This means that the power generation plant must suffer physical damage, such as from a fire, flood, explosion, or other causes. If your business suffers a power outage because the utility company was conducting routine maintenance, or because the government ordered the utility firm to shut down for safety reasons, then ordinarily, you will not be covered for business interruption losses.

Also, coverage will depend on the specific wording of your business interruption policy. Some insurers in Singapore will automatically cover business losses caused by power outages. Some insurers won’t include this as an automatic cover, and may require you to specifically request for it, with additional premiums payable. If you feel it’s important for you to have coverage for power outages, then make sure you read through your policy wording to ensure that this coverage term is included.

Business interruption coverage for power outages can get complicated. This article will help to explain the specific scenarios where your business interruption cover will kick in to cover you against losses suffered from power outages.

What should I look for if I want business interruption insurance for power outages?

Your business interruption policy wording should have a “Public Utilities” clause, which states that business interruption coverage applies in the event of a failure of utility services to your company. Look for a clause that is similar to the one below in your policy wording. It shouldn’t be hard to find. Just search for “Public Utilities” – if it’s in the wording, then you’ll have the coverage.

Let’s take a look at a sample Public Utilities clause (emphasis mine):

“We extend to cover losses resulting from interruption or interference with the Business as a result of damage to property at any electricity station, sub-station, gas works, or water works from which You obtain direct supply, provided the supply failure extends for a minimum of 12 hours, and Our liability shall only extend to such period exceeding 12 hours.”

That’s quite a lot of legalese. Let’s break it down into layman’s terms.

The sample clause above basically means the following:

1. The insurance company will cover you for business interruption losses due to public utility failures
2. These utility failures must be caused by the utility plant suffering some kind of property damage
3. Examples of covered utility failures include power outages, water supply outages, and gas supply outages
4. Any power outage or utility failure must last for more than 12 hours in order for coverage to take effect

What else is covered besides power outages? Do utility failures only mean an absence of electricity supply?

As you can see from the sample wording above, it’s common for business interruption coverage to protect you against more than just power outages. Water supply and gas supply faults are commonly covered too. Such broad cover is good since electricity, water, and gas are essential for all businesses and homes to run.

Must my power outage be caused by a specific reason in order for me to receive business interruption coverage?

Yes. In the sample policy wording above (which is quite representative of most business interruption policies), there is a key phrase that often goes unnoticed by business owners. This key phrase is that insurance coverage only applies “as a result of damage to property at” the public utility plant itself.

What are the implications of this? It means that you will not receive coverage if your power supply is interrupted because of any other reason that the utility plant’s premises suffering physical damage.

Let’s clarify this with some concrete examples. Here are some situations where business interruption coverage would NOT apply:

1. The power transmission lines along the road were destroyed by a storm. Since the power lines were damaged, you couldn’t receive electricity. However, the utility plant that you receive power from remained undamaged. Coverage would not apply here as the transmission lines are not a part of the utility plant’s premises.
2. The government orders power plants across the country to shut down. Since the utility plants have not suffered physical damage, coverage would not apply here.
3. The utility plant shuts down its electricity, water, and gas supply (e.g. for routine maintenance, or for safety reasons). As long the utility plant itself is not damaged, coverage would not apply.
4. The utility plant suffers a cyber attack which interrupts its cooling systems, damaging the utility plant and cutting off its power generation abilities. Although physical damage has been suffered, most insurance policies contain an “Absolute Cyber and Data Exclusion”, which exclude losses stemming from a cyber attack. Coverage would not apply here.

Let’s look at opposite scenarios now. Here are some situations where business interruption coverage WOULD apply:

1. The utility plant suffers a fire, damaging its ability to generate water and electricity. Your power and water supply get cut off. Coverage would apply here since the plant’s premises were physically damaged.
2. A natural disaster (e.g. earthquake or flood) destroys the utility plant. Coverage would apply here.
3. The utility plant’s cooling systems overheat due to poor maintenance, damaging its ability to generate electricity. Its water pipes accidentally burst due to mistakes made by their own engineers. Many customers are thus left without electricity and water. Coverage would apply here.

It’s also helpful to take a look at some real life examples where major power outages have affected businesses.

Real life example 1: 

In late February 2021, a massive snowstorm struck Texas in the Unites States. The snowstorm that hit Texas damaged many overhead power transmission lines. This cut off electricity supply to millions of people, and tens of thousands of businesses across the State. Chillers and freezers were left unpowered, causing F&B businesses to lose their food inventory. Offices couldn’t operate their electronic equipment. Manufacturing facilities were forced to shut down. If all this damage wasn’t a nightmare in itself, what made the entire situation worse was that many business owners were suddenly finding out that their business interruption insurance couldn’t cover them! Many insurers in Texas had denied the slew of business interruption claims that were filed. Was this just another case of insurance companies playing dirty tricks the moment their clients started filing claims? Well, not really. The snowstorm didn’t actually cause physical damage to the utility plants themselves. The primary cause of power outages was downed power supply lines. In the US, most power cables are laid across miles and miles of overhead poles, completely exposed to the fickle and devastating power of the elements. This is very different from the situation in Singapore, where power cables are safely buried beneath the ground. Many such power poles in Texas came were toppled by the brute force of the snowstorm, damaging the electrical cables that delivered power to homes and businesses. Since the damaged power cables were not within the utility plant’s premises, business interruption insurance was not applicable for such scenarios.

Other businesses that had suffered physical damage to their own business premises as a result of the storm were fine with their insurance claims. This is because business interruption insurance covers businesses if they can’t operate, due to damage suffered to their own premises.

Real-life example 2:

In 2019, huge wildfires engulfed northern California, causing more than 100,000 people to be displaced from their homes. The cause of the massive conflagration was determined to be downed power transmission lines from Pacific Gas & Electric (PG&E), a large utility corporation. The utility companies determined that the best way to stop the massive fires from spreading even further was to shut down their electricity transmission services. PG&E and other major utility companies in California shut down their power services from 9^th October 2019 to 1^st November 2019. Power services were restored intermittently throughout this 3-week period, but for most of this time many residents and businesses were left struggling without power. Many F&B businesses suffered tens of thousands of dollars of losses as their inventory rotted. Manufacturing companies suffered millions in losses with idle factories. Because of the sheer breadth of the fire, many of the utility companies’ own facilities ended up being damaged, too.

Businesses in California started filing business interruption insurance claims for their losses suffered during this massive power outage. For businesses that had suffered physical damage due to the fire, their claims went through fine. For businesses who received utilities from a utility plant that had been damaged by the fire, their claims went through fine. But for those businesses who received utilities from a plant that had not been damaged, and whose own business remained unscathed by the fire, their claims did not go through. This is because they didn’t suffer property damage to their own business, and their utility provider also didn’t suffer any property damage themselves.

Although these 2 real-life examples are from the US, they are good demonstrations of how business interruption insurance functions when it comes to power outages. There is complexity involved in determining whether claims are admittable (or not). Most business owners may initially think that any power outage is covered. In reality though, the cause of the outage is absolutely fundamental to determining whether coverage applies.

It’s important to understand the situations in which business interruption insurance would and wouldn’t apply. That way, you can request for broader coverage from the get-go if you need it, and you won’t be caught off-guard if your business gets hit with a power outage and suffers losses that you want to claim back from the insurer. It’s also worthwhile to speak with an expert who can provide you with proper advice on business interruption coverage.

Consider additional protection against power outages

It’s a good idea to not rely solely on business interruption insurance to protect your company against power outages. If your business will suffer significant losses if you don’t have power access, then you should invest in back-up power generators. Businesses like restaurants, bars, data centres, and factories would all benefit from having a source of back-up power.

Must the power outage last for a minimum time period, before business interruption insurance kicks in?

Yes. Your business interruption policy will specify the minimum number of hours that you must be without power, water, or gas. This is called the “time excess”.

For instance, if your time excess is 12 hours, then you must be denied utility access for at least 12 hours. Once you have been without power, water, or gas for more than 12 hours, you can file a business interruption claim. This is, of course, provided that the cause of the utility interruption was due to a valid cause (as explained in the preceding paragraphs).

The amount of time excess set is meant to exclude small interruptions that may commonly occur. These small interruptions of 30 minutes, or a couple of hours at most, may occur due to routine maintenance works. Minor interruptions are easier for businesses to handle with basic contingency planning. For instance, if a restaurant knows that its electricity will be interrupted for 1 hour due to power supply maintenance, it can pack its fridges with lots of ice to keep the food cold during that short period. Food losses are unlikely to occur if the restaurant is prepared. Excluding small interruptions also helps to keep premiums for business interruption insurance affordable.

How can I get business interruption insurance for power outages?

You can purchase business interruption insurance online here, starting from just $9/month. You’ll get an instant quote, and you can purchase your coverage online within only 3 minutes. Provide’s digital platform helps you save up to 25% on business insurance. Our business interruption insurance covers losses due to power outages.

SME owners are often focused more on growing their top line than on managing risk. When you’re running a smaller company, that’s a natural instinct. However, SMEs have much less cushion than large enterprises to protect themselves if something goes wrong. Injuries to employees or customers, fires, equipment breakdown, and lawsuits can all wreak significant damage on an SME’s profitability.

Business insurance is therefore absolutely essential to minimising the myriad risks that plague small businesses. You’ll find that your public liability insurance premiums will be well worth the money if a customer sues you after being injured while visiting your business premises. If your shop suffers a fire, commercial property insurance and business interruption insurance will be life-savers.

Of course, simply carrying a comprehensive business insurance policy doesn’t guarantee that you’ll receive 100% of any claims amounts that you file. As a policy holder, you need to make sure that you don’t commit some basic mistakes when filing claims. Otherwise, the outcome of your claims may be adversely affected.

Here are the 6 most deadly business insurance claims mistakes that SME owners make, along with an insurance insider’s advice for avoiding them.

Mistake 1: You didn’t notify your insurance broker immediately

If you encounter a situation that you think might result in a claim, contact your insurance broker immediately. For instance, if you own a shop and have Commercial Property Insurance, and your shop suffered a fire, call your broker at once to let them know your premises has been burnt. If you have professional indemnity insurance, and your business has been served a lawyer’s letter, notify your broker at once. Don’t wait until a lawsuit has commenced and is well under way before finally notifying your broker.

Most insurance companies have claims departments that are staffed with quick-response teams. These teams are responsible for rapidly providing advice on the next steps that you should take when faced with a claimable situation. For instance, if you carry Professional Indemnity Insurance and notify your insurer of an impending lawsuit, your insurer will very quickly take over your legal defence for you. The insurance company’s legal team will step in to defend your company, since it is in the mutually beneficial interest of both you and your insurer to win the case.

The sooner you notify your insurance broker about a claim, the quicker and easier the claims process will be. When assessing any claim, the first question any insurance company will ask is: when did the incident occur? If you provide a date that stretches back an unduly long time, the insurance company will have to conduct a much more thorough investigation during its claims assessment process. This will involve more questions, more site visits, more phone calls, and just generally more effort for everyone involved, including yourself. This is understandable, since insurers have strict controls to prevent insurance fraud, or the inflation of claim amounts. If you delay the notification to your broker, it may also suggest to the insurance company that perhaps your claim was not as bad as you’ve made it out to be. If it was really that severe, surely you would have notified them immediately after the incident occurred?

Mistake 2: Admitting fault

Never admit fault. In the event of any injuries, property damage, or lawsuits, never admit to other parties that you were at fault without first consulting your insurance company. This helps to protect your own legal position. Openly stating that you made a mistake can jeopardise the strength of your case in a lawsuit. Most crucially, admitting fault can be grounds for the insurance company to deny your claim. Unless you have the express, written consent of your insurance company to make payments for damages, you should never admit fault first.

When in doubt, simply inform your insurance broker of your claim. The insurance company – with their formidable legal experts and claims professionals – will step in to advise you on the next steps to take.

Example: Mr. A runs a logistics company. While delivering bulky goods one day, he accidentally damaged the side door of someone’s car. There was a big dent in the door, and the window was partially broken. The owner saw this, and filed a legal claim of $1,000 to repair their car. Mr. A was flustered by the legal letter. Instead of immediately notifying his insurance broker, Mr. A apologised for causing the damage, and quickly paid up the amount demanded. Later, Mr. A filed a claim with his insurance company to recoup the $1,000 he paid.

Analysis of example: In the example above, the insurance company has a right to deny the claim. Making a payment to the owner of the car might seem to be an upstanding thing to do. However, in terms of protecting his legal interests, Mr. A performed poorly. He should really have notified his insurer first, and gotten permission from them before making any kind of payment or even admission of wrong. Mr. A has already forked out good money for his liability insurance policy, so it doesn’t make sense for him to pay damages out of his own pocket. Furthermore, Mr. A was lucky that the damage in this case was relatively minor, and the legal claim was only for $1,000. If the damage had been more severe, or involved a personal injury, the lawyers of the opposing party could have pursued the case much more aggressively. Because he had admitted fault, Mr. A could have been on the hook for a much higher sum of money – potentially tens or even hundreds of thousands, depending on the damage or injury caused. If he had informed the insurer first, the insurance company would have activated their lawyers to negotiate on Mr. A’s behalf. In this case, the insurer has a right to deny the claim. Mr. A would have to rely purely on the goodwill of the insurer if he wishes to be reimbursed.

Remembering not to admit fault also prevents you from falling victim to frivolous lawsuits. Such lawsuits can be launched by opportunistic individuals looking to make a quick buck, at your expense. To such individuals, hearing an admission of fault can be an open and delectable invitation to wring money out of your company.

Mistake 3: Not sufficiently documenting damage

In any claim, the insurance company will need to see proof of damages. If you don’t have sufficient documentation of damages that you’ve suffered, then the insurer will not have sufficient information to work out an accurate calculation of the true extent of damage or harm you’ve suffered. Working off such imperfect information may eventually result in a lower claims pay out, or even a denial of your claim.

Here are some tips to ensure that you have sufficient proof for your insurance claim:

1. If physical harm has been suffered, photograph the damage or injuries immediately. Try to get a few different angles, and some close-ups if possible, so that details can be seen by the insurer’s claims adjusters. If particularly expensive equipment has been damaged, you may wish to focus on photographing that first.
2. Keep copies of any bills you incur as a result of the claim. You may be able to claim these expenses back from the insurer, depending on the type of insurance you have and what you’re claiming.
3. If you are filing a worker’s injury claim, make sure that you submit the necessary reports to MOM. Insurers require the injury incident report you submitted to MOM to pay out any claims. Keep copies of any doctor’s bills or medical reports.
4. Try to fill out the insurer’s claim forms quickly after the incident has occurred. You should do this while your memory is still fresh so that you can recall most of the details. Don’t skimp on your explanations – the more information you provide, the easier it is for the insurer to assess your claim.
5. Document all of your communication with your insurer. This documentation will minimise the possibility of disputes in a “he-said-she-said” scenario.

Mistake 4: Disposing of damaged goods

It might be tempting to get rid of damaged property, say after a major fire, but you should make sure that you don’t dispose of anything without seeking the insurer’s permission. Firstly, it’s important to retain all physical evidence at the damaged scene for legal purposes. The police and fire department might be involved, and they would need access to the scene to conduct their investigations.

Secondly, retaining all damaged property serves as concrete evidence of the severity of the loss you’ve suffered. The insurance company’s own claims adjusters will need access to the physical evidence as part of the claims assessment procedure. If you hire your own public claims adjuster, these individuals will also need access to the scene of the loss. This helps greatly with quantifying the amount that you’re eligible to claim. Sometimes, it’s hard to get a sense of the value of an item, or the quantity of items through pictures. It can be easier to see the damaged item right in front of you. Such physical evidence will have an impact on the amount that claims adjusters award to you in the end.

Thirdly, for Commercial Property Insurance, it’s common for insurers to have “salvage” clauses that allow the insurer to put up partially damaged property for sale. The proceeds of such damaged property will help the insurer to recoup money from the claims pay outs given to the policyholder.

Fourthly, most insurance policies require policyholders to take reasonable steps to prevent further damage from occurring. Disposing of an item may violate this requirement. The insurer may be able to argue that the disposal of damaged items constitutes a violation of the policy, and may either reduce the claims pay out or deny coverage. Some insurers may cover expenses incurred to prevent further damage from occurring. Speak with your insurance broker to determine if your policy covers these expenses. If it does, make sure to document your bills/receipts and submit them to your insurer as part of your claim.

Mistake 5: Not being familiar with your policy

Many business owners may assume that their business insurance policy covers any and every risk. They may not have read the policy wording properly before purchasing their policy. When a claim arrives, tempers can flare and fingers get pointed.

Although insurance brokers and other intermediaries will do their best to advise clients, it’s important that policyholders are themselves familiar with the fundamentals of their coverage. You certainly don’t have to know every technical detail (leave that to the experts), but do be aware of what situations are generally covered, and what situations are generally excluded.

Let’s take a look at Commercial Property Insurance, as an example. Some Commercial Property Insurance policies are tightly worded, and will exclude damage from sprinklers, burst pipes, and other water sources. This is because such damage is quite common, and insurers that offer such policies with narrower coverage wish to reduce their losses. Other insurers will word their policies more broadly, and will cover water damage from a wide variety of sources – burst pipes, sprinklers, leaks from the upstairs neighbour, etc. (Plug: Provide’s Commercial Property Insurance policies are broad and cover water damage. Click here to buy it online!). If you feel such coverage is important to you (burst pipes certainly are common), then it’s important that you understand whether your policy covers such an event or not. Don’t wait until a pipe actually bursts before you get a nasty surprise that you don’t actually have any coverage.

Insurance policies aren’t the most simple things in the world. Every client has their own unique expectations of what they want covered. In a perfect world, every risk under the Sun would be covered. Of course, such a policy would be prohibitively expensive to all but the most wealthy corporations. So it’s important to identify which risks worry you the most, and then to go about purchasing a policy to meet those needs. Here at Provide, our policies are highly comprehensive, and meet the needs of the vast majority of SMEs in Singapore.

Also, when you know what you’re covered for (and what you’re not), you can identify coverage gaps. You can then go about purchasing additional policies to fill these gaps, ensuring that your company is full protected.

Mistake 6: Bending the truth

Policyholders may often be tempted to exaggerate when filing a claim. After all, it’s in their best interests to claim the maximum amount possible. It’s important to remember that committing insurance fraud is illegal. Under the Penal Code, fraud can be punished by up to 20 years in jail, and/or a fine.

Be honest with your insurance company about what happened. Speak with your insurance broker, and tell them the truth. There is no need to exaggerate, as a good broker will advocate for the claims you file. Both insurers and brokers have seen numerous claims, and it’s often easy to tell when someone is not being completely honest. Dishonesty can result in your claim being denied.

Filing claims right saves you time and money

When you have an insurance claim, it can be a frustrating and worrying time. Your business is affected. There’s uncertainty over how soon the insurance company will pay your claim. You’re left wondering when business will ever get back to normal. To minimise such worries, it’s crucial that you follow the tips above to avoid insurance claims mistakes. Filing your claims properly will help you get your claim paid in the quickest and smoothest fashion possible. It’s also important that you pick an insurance broker that will serve as a strong claims advocate for you. When you choose Provide as your insurance broker, we’ll be there with you every step of the way. Our expert brokers will help you get back on your feet in no time.

Bailee liability insurance is a policy that protects you from liability when goods under your care/control are damaged or lost.

If your business handles goods that belong to someone else, then you are liable if those goods become damaged while they are in your care, custody or control. For example, let’s say you run a logistics company that delivers goods for clients. While your vehicle is transporting these goods, some of the goods topple over, and break. Your client will now hold you liable to compensate them for this damage. Such incidents could happen very easily, and fairly frequently. If you don’t have insurance in place, the cost to compensate your clients can be very high.

A common question we receive from clients is whether their Public Liability insurance policy will cover damaged goods. The answer is, unfortunately, a resounding no. It’s crucial to note that most Public Liability policies will specifically exclude coverage for “property under care, custody or control”. This clause basically excludes coverage for someone else’s property that you are responsible for. This is why it’s critical to have a Bailee Liability Insurance policy, so that you won’t have to pay for any damaged or lost items out of your own pocket.

What does Bailee Liability Insurance pay for?

Bailee liability insurance pays for:

1. Cost to replace damaged/lost goods
2. Lawyer’s fees if you get sued for damaged/lost goods
3. Damages for lawsuits related to damaged/lost goods

For instance, let’s say you’re delivering your clients goods in Singapore. On your journey to the shipping address, your delivery van gets into an accident, causing your client’s goods to break. These damaged goods are rejected by the recipient, and because you damaged them, your client is now demanding compensation from you. A bailees liability policy will pay for the cost of replacing these damaged goods.

Another example would be if you ran a warehouse/storage company. While the goods stacking the goods in your warehouse, some of your workers carelessly dropped them, causing damage. Your client arrives at the warehouse, sees the damaged products, and demands you pay for the damage. Bailees liability insurance will cover the costs of replacing these products.

Who needs Bailee Liability Insurance?

As long as your business stores or delivers goods that belong to other people, then Bailee Liability insurance is critical for you.

Businesses that typically carry bailees liability coverage are:

1. Delivery companies/couriers
2. Freight forwarders
3. Warehouses
4. Goods packers

Important tips and tricks for Bailee Liability Insurance

1. Negotiate exclusions carefully:

There are some important exclusions or conditions that are commonly found in Bailee Liability insurance policies. These terms and conditions vary from insurer to insurer, and on the specific policy in question. However, you’ll want to take note of these conditions in general so you don’t get caught off guard.

2. Make sure to combine your bailees liability with public liability insurance:

If you’re operating a logistics company, it’s absolutely crucial that you have not only bailee liability insurance, but also public liability insurance. If you’re delivering goods, your delivery drivers could easily cause damage to other people or property while working. For instance, they could hit someone with their delivery truck, or they could damage walls/break furniture while moving heavy goods around.

For warehouse operators, if you have external visitors coming in (e.g. clients or external delivery personnel), then you can be held liable for any injuries to these visitors while they’re on your property. If heavy goods fall on them in your warehouse, or if they slip and fall, you will have to pay their medical fees and potentially even have to defend yourself in a lawsuit.

Public liability insurance will protect you from these risks. The majority of logistics companies will combine both bailee liability insurance with public liability insurance.

3. Consider adding fidelity guarantee insurance if you’re afraid of employees stealing your clients’ goods:

As mentioned in the table above, bailees liability insurance will not cover loss of client goods due to employees stealing them. This risk is actually covered by a fidelity guarantee policy. Premiums for fidelity guarantee insurance are affordable (starting from $100/year). If you’re handling precious goods, or you’re worried that employees might pilfer items, then it’s strongly recommended to add on a fidelity guarantee policy.

Where to buy Bailees Liability Insurance?

Provide is the best place to get bailees liability insurance. Our digital model creates lower overheads, so we pass every dollar saved back to you. When you use Provide, you’ll save up to 25% on your premiums immediately!

Get your Bailees Liability Insurance quote now!

The 5 Best Benefits of Professional Liability Insurance

Have you been considering getting professional liability insurance (AKA professional indemnity insurance)? Have you been feeling a little unclear about what exactly are the benefits of protecting your business with this type of insurance? In this guide, we clearly explain what the 5 best benefits of professional liability insurance are.

What is professional liability insurance?

Professional liability insurance is just another name for professional indemnity insurance. They’re both the same policy – just called different terms. Professional liability insurance protects you from negligence, errors & omissions, subcontractor errors, IP infringement, defamation, and many more legal claims. It’s a very useful cover that almost all business owners should seriously consider carrying at all times.

Benefit 1: You’ll have access to top class lawyers against lawsuits.

One of the most critical benefits of professional liability insurance is having guaranteed access to the industry’s best legal firms. If you have professional liability insurance when you get sued, in most cases the insurance company will take over the lawsuit. After the insurance company takes over your lawsuit, they will appoint their own lawyers to defend you. What does this entail? Well, if the insurance company’s lawyers are defending you, you can be very certain that the lawyers you’re getting are going to be absolute world-class. Insurance companies have huge resources to engage the absolute best lawyers in any country they operate in. It’s in their best interests to see you win, because if you lose, they’ll have to pay your claim!

When you buy a professional liability policy, you’re not just purchasing protection against lawsuits. You’re also purchasing access to the best legal defence around. The best part is, with your policy, you won’t have to pay for such star legal power – the costs are borne by the insurance company.

Benefit 2: You’re a lot less likely to go bankrupt or lose huge amounts of money from lawsuits.

Another one of the key benefits of professional liability insurance is that this policy will save you from suffering huge financial losses or outright bankruptcy. Imagine you run a consulting firm, and you worked on a big project for a client. The contract value was several hundred thousand dollars – and you couldn’t have been happier at all the money you made. You made sure to double-check all your work and proposals, giving thoughtful business advice that was encouraging yet never over-promising. However, after implementing your advice, your client ended up suffering losses. Your client turns around and blames you for the dip in profits now afflicting their business. They then sue you for hundreds of thousands of dollars. Even if you were completely innocent and the losses were due to your client’s own mistakes, you still have to defend the lawsuit filed against you, right? And lawsuits cost money to defend – a lot of money.

Carrying professional liability insurance is thus vital to prevent your business from being shot down by a hugely expensive lawsuit.

Benefit 3: You’ll be able to easily meet liability insurance requirements from clients.

Some client contracts will require you to show proof of professional liability insurance before you can be awarded the project. With professional liability insurance, you won’t have to worry about whether you can meet such requirements or not. Clients often require this not only to protect themselves against potential mistakes made by contractors/suppliers, but also to weed out smaller players that can’t afford (or don’t have the foresight/expertise) to carry such insurance in the first place.

Benefit 4: You’ll appear highly professional and earn more respect from clients.

SMEs that have professional liability insurance send a clear message to their clients and business partners. Carrying professional liability coverage lets them know that you understand the risks of legal liability, and have taken on coverage to . It also helps to differentiate your business from competitors that don’t carry professional liability insurance. Clients tend to give greater respect to businesses that carry this coverage.

Benefit 5: You’ll be protected against government fines if you breach regulations.

Another one of the top benefits of professional liability insurance is protection against civil fines and penalties for regulatory breaches. For instance, if you make a mistake as an engineer, you can be fined for flouting governmental standards on building codes. If you’re a lawyer and make negligent mistakes while handling a client’s lawsuit, you can be fined for such conduct. In each of these scenarios, professional liability insurance would step in to protect you from the fines levied upon you by the state.

Of course, this isn’t meant to be an excuse to go out and break every regulation in the book. But it’s nice to know that when you carry professional liability insurance, you’re well safe against even governmental penalties against you! It’s certainly very comprehensive liability protection.

Cost-Benefit Overview

Professional liability insurance from Provide starts from about $42/month, which works out to about $650/year. This starting premium will get you around $100,000 to $200,000 in cover, with more coverage available for nominal increases in premiums. For context, market rates for professional liability insurance start from about $1,000, so you will definitely reap significant savings for yourself when you use our online platform.

That said, some SME owners look at the $650-dollar cost and still balk. However, when you consider that you’re getting $100,000 to $200,000 in coverage for $650, then the sheer benefits of professional liability insurance you’re getting becomes much clearer, doesn’t it? If someone sues you for $100,000, this $650 policy could potentially save your entire business from financial devastation, or even outright bankruptcy. It’s important to view liability coverage as an investment, where the costs are actually relatively minimal compared to the protection you receive.

Ready to protect yourself with professional liability insurance?

Provide is the best place to get professional liability insurance online quotes. Save up to 25% on your premiums when you use our platform. Our online operating model creates lower overheads, so we pass every dollar saved back to you. Start your quote today!

Contractors All Risk vs Professional Indemnity Insurance: 5 Key Differences

Do you run a construction or renovation company? Ever been confused by contractors all risk insurance vs professional indemnity insurance? Don’t worry! We’re here to explain in simple terms what each policy type covers, how they’re different, and whether you should have both policies.

In this helpful guide on contractors all risk vs professional indemnity insurance, we explain:

• How coverage of each policy is different
• How the structure of each policy is different
• What kinds of situations/claims will trigger each policy type
• Whether you need both types of policies
• Where’s the best place to get both policies

#1. Insurance coverage

Contractors all risks insurance covers property damage, public liability, and worker injuries. Professional indemnity insurance covers liability from the professional services/advice you provide.

What is contractors all risks insurance?

Contractors all risks is an insurance policy designed for construction and/or renovation companies. It’s designed to protect against property damage, some kinds of liability, and injuries that occur during building or renovation projects.

What is professional indemnity insurance?

Professional indemnity is an insurance policy designed to cover legal liability from faulty works. If you produced faulty work, or your clients allege you did something wrong, this policy will protect you against lawsuits targeting your company.

What’s the main difference in contractors all risk vs professional indemnity insurance?

Contractors all risk and professional indemnity protect you from different types of risks that you’ll face. Contractors all risk is designed to protect you from any property damage to your client or third-parties (e.g. neighbouring properties). It protects you from legal liability from property damage or injuries caused to third-parties. It also protects you from worker injuries.

On the other hand, professional indemnity is designed to protect you from allegations of negligence, errors and omissions, sub-contractor faults, and more. These are all extremely important covers for construction/renovation companies. If there are any faulty works in the building, it’s very common for clients to

Firms operating in this sector will very frequently make use of sub-contractors to perform certain works. If your sub-contractor makes mistakes (and let’s be frank – mistakes are common), you can be held legally liable for their errors! Having to constantly check the quality of your sub-contractor’s work is tiring and costly enough. If you end up being sued for their errors, that’s another set of massive costs that you’ll have to shoulder if you don’t have professional indemnity insurance.

#2. Insurance structure

Contractors all risks is an all-in-one package, while professional indemnity is a standalone policy

Contractors all risk is actually a combination of several different types of insurance, bundled into a single policy. The 3 major types of insurance in a contractors all risk bundle are:

1. Property damage insurance
2. Public liability insurance
3. WICA insurance

Insurance companies created contractors all risk insurance to meet the unique needs of the construction/renovation contractor industry. If you were to purchase each types of the above insurance individually, you would end up spending far more. Buying a contractors all risk policy gives you a bundle discount, and it also makes policy administration matters (e.g. renewals and claims) easier for you.

While contractors all risk is a bundle policy, professional indemnity insurance is a standalone policy.

#3. Differences in how each policy responds to claims

To help make the distinction between contractors all risk vs professional indemnity clearer, let’s take a look at some examples that frequently occur in real life.

Situation 1: Damage to client’s property

Let’s say you run a renovation company. You win a contract to renovate a client’s kitchen. While renovating the kitchen, you accidentally damage a room that’s situated next to the kitchen. You damaged the shared wall and some piping.

In such a situation, property damage insurance coverage will kick in. CAR insurance will first pay for any engineers/surveyors/architects you need to engage to assess the damage, and to recommend repair plans. CAR insurance will then pay for the cost of the actual repairs.

(Note: to be very specific, it is the property damage section of the CAR policy that will be activated here, as it is your client’s property that has been damaged.)

Now, let’s say that despite you trying to make amends for the damage, your client remains extremely upset and dissatisfied with your work. They decide to sue you for negligence. In this situation, professional indemnity insurance will be activated to protect you from the lawsuit.

Situation 2: Damage to neighbour’s property

Take a similar example as above, where you run a renovation company. While performing drilling works on a client’s house, you accidentally drill through the wall into the neighbour’s property! The neighbor is horrified, and demands you make compensation for the damage. In such a situation, CAR insurance will kick in. CAR insurance will first pay for any engineers/surveyors/architects you need to engage to assess the damage, and to recommend repair plans. CAR insurance will then pay for the cost of the actual repairs.

(Note: to be very specific, it is the public liability section of the CAR policy that will be activated here, as it is a third-party’s property that has been damaged.)

Let’s say this hopping-mad neighbor ends up suing you for the damage you caused to their property. They file a lawsuit against you for negligence, demanding $500,000 in damages. Professional indemnity insurance will now be activated to protect you from this negligence lawsuit.

Situation 3: Worker injuries

Let’s say you’re working on a construction project. While performing building works, 5 of your workers get injured. Your injured workers suffer from broken bones, cuts, and other injuries that are common in the construction industry. The total hospital bill arrives, and you stare in disbelief at the figure: it’s a whopping $100,000 for 5 workers.

Under the Work Injury Compensation Act (WICA), you are legally required to pay for your workers’ injuries. You must pay for their medical expenses, and their lost wages while on MC.

The neighbour is horrified, and demands you make compensation for the damage. In such a situation, CAR insurance will kick in. CAR insurance will first pay for any engineers/surveyors/architects you need to engage to assess the damage, and to recommend repair plans. CAR insurance will then pay for the cost of the actual repairs.

(Note: to be very specific, it is the public liability section of the CAR policy that will be activated here, as it is a third-party’s property that has been damaged.)

Situation 4: Faulty works

You’ve just finished constructing a magnificent condominium project for your client. However, during the inspection phase, your client discovers multiple errors with your construction work. There are many cracks and holes along the project’s pavements and walls. Multiple pipes are leaking. There are even suspected issues with the foundational integrity.

Because of these errors, your client sues you for construction errors and omissions, demanding $30 million in damages.

In such a case, you must have professional indemnity insurance to protect you from the costs of the lawsuit. With a professional indemnity insurance policy, the insurer will pay for your lawyer’s fees, and any damages (up to your policy limit) that may be awarded by the courts. A contractors all risks policy will not respond in such a situation.

Real-life claim example:

Source: The Straits Times

If you had been one of the parties involved in the above project and were sued, the policy that would protect you would be professional indemnity insurance. The lawsuit centred on construction defects due to negligence and other factors. Because professional indemnity insurance protects against allegations of negligence, you would be covered. Contractors all risks insurance would not respond here, unless you had also caused, say, damage to your client’s property while building the condominium, or your workers had gotten injured in the construction process.

#4. Do you need both contractors all risks and professional indemnity insurance?

Yes. If you run a construction or renovation company, you’re going to need protection against the major risks listed in the table above. The only real way to protect yourself against these big risks is to carry both contractors all risk insurance, and professional indemnity insurance.

Many construction or renovation companies make the mistake of not carrying professional indemnity insurance. Most of such companies only focus on purchasing contractors all risks coverage (or erection all risks coverage), because these companies have seen first-hand the common types of mishaps that happen during construction/renovation projects. Damaged property, damaged tools, or worker injuries are very common in this line of work.

However, what business owners take less seriously is the risk of legal liability for faulty/defective work. In fact, this risk is potentially even more hazardous than the risk of damaging property or having injured workers. Lawsuits related to construction or renovation projects can easily cost you millions. With such massive costs involved, it’s vital that construction and renovation contractors carry a good professional indemnity policy, with the coverage managed by a knowledgeable insurance broker.

#5. Where’s the best place to get both contractors all risks and professional indemnity insurance?

Provide is the best place to get online quotes for contractors all risk insurance, and professional indemnity insurance.

When you use Provide, you’ll save up to 25% on your insurance premiums. Our online operating model creates lower overheads, so we pass every dollar saved back to you. At Provide, we take pride in understanding the unique risks that each industry and business faces, so we can recommend the best solutions to protect you from such risks.

Short Term Professional Indemnity Insurance: 4 Things To Know Before Buying

Do you have a short-term contract that requires you to carry professional indemnity insurance? Are you wondering whether you can just buy coverage for a few months to save on costs? This is a common questions that our clients pose to us. In this guide, we explain:

• What is short term professional indemnity insurance
• When would businesses use short term professional indemnity insurance
• Whether it’s actually advisable to use short term insurance policies
• Where’s the best place to get short term professional indemnity insurance

#1. What is short term professional indemnity insurance?

When people talk about short term professional indemnity insurance, they’re usually referring to contract-based policies, rather than regular annual policies.

Being contract-based, a short term professional indemnity policy only protects the specific contract that it’s tied to. So if you only have 1 or 2 projects a year, this might be a feasible option. However, if you do lots of projects, then it’s probably a better idea to just go with an annual policy, since managing lots of policies would be an administrative nightmare. There’s also the issue of cost and run-off liability, which we discuss later in this article.

On the other hand, a regular annual professional indemnity policy provides 12 months of coverage. During these 12 months, all the professional work you do is protected by the annual policy (subject to policy exclusions). You could do 1 project or 100 projects – they’re all covered.

#2. When would businesses use short term professional indemnity insurance?

Usually, short term professional indemnity insurance is used when taking on large and infrequent projects that require professional liability coverage.

A common scenario is when a company wins a large project, but the liability coverage requirements exceed the limits of the company’s existing professional indemnity policy. If winning such large projects only happen infrequently, then it may not be cost-effective to increase the company’s annual policy limits just to meet the coverage requirements of this one project. In such a scenario, it may be more affordable to instead take on a short term professional indemnity policy. This short term policy will be used to just cover liability stemming from this particular contract.

We’ll use an example for greater clarity. Let’s say you run an IT consulting company. As part of your basic liability protection plan, you have an annual professional indemnity insurance policy with $500,000 coverage. One year, you happen to win a really large project worth $5 million. That’s awesome news! However, given that such large projects are not regular occurrences for you, you may not need to increase your annual limit to cover such projects. Doing so may be too costly in the long run. Instead, what you can do is to take on a contract professional indemnity policy that will specifically cover this $5 million contract.

Another common scenario that we see much too frequently is when businesses purchase short term professional indemnity policies only when clients require it in their contracts. For all other projects through the year, the business remains uninsured against legal liability from the work they do. Now, such situations are extremely dangerous for business owners. If you’re providing professional advice, you never want to remain uninsured against legal liability. A single lawsuit could easily cripple, or even bankrupt your entire business.

#3. Is it advisable for businesses to use short term professional indemnity insurance?

You should only use contract-based professional indemnity policies when taking on infrequent and large contracts that won’t be adequately covered by your annual indemnity policy. However, even when taking on such projects, do exercise caution when deciding to take on a short term policy. It’s important to note that contract-based indemnity policies run a real risk of leaving you exposed to liability after the policy expires. This is called “run-off liability” risk. Why is this so? Remember that liability from your projects does not exist only when you’re actively working on them. In many cases, service providers actually only get sued many months or years after they’ve completed their projects! This is because defects or mistakes in the completed work often take some time to become noticed, or to actually appear in the completed product. This is why maintaining continuous professional indemnity insurance is so important, because you never know when mistakes will manifest and result in liability for you.

When you purchase short term professional indemnity insurance, timing-related declarations are key. You must let the insurer know the following:

1. Project start date
2. Project end date
3. Project maintenance period – for example, 18 months of servicing after the project is completed and delivered to the client

The short term professional indemnity policy will only cover you from point (1) to (3). Once the project maintenance period is over, you will be fully exposed to any liability claims that hit you.

So how should business owners mitigate run-off risk from short term professional indemnity policies? There’s 2 important things you need to do:

1. Ensure that the maintenance period of coverage is sufficiently long. Some industries like construction may require many years of maintenance cover because defects often take a long time to show up.
2. Ensure that you have an annual professional indemnity policy. In the event that you are sued after the short term policy expires, you’ll have to rely on your annual policy for protection.

To really protect your business, business owners need to have an annual professional indemnity policy in place. It’s really impossible to predict when lawsuits from your projects are going to come up, so in the event that the run-off cover from your short term policy expires, your annual policy will kick in to protect your business from liability.

Sometimes, clients will ask us: can we configure the maintenance period for the short term policy to be several years long? This is technically doable. However, the cost would be so prohibitive that you would be better off just getting an annual policy instead. Outside of taking on large and infrequent projects, it’s much more advisable to simply stick with having annual policies. You’ll be much better off purchasing an annual professional indemnity policy, and then increasing the limits of your annual policies as your business grows.

It’s not an uncommon practice for businesses to only take on a short term professional indemnity policy for 1 or 2 projects each year, while they leave the rest of their projects uninsured. In every possible situation, this is a really, really bad idea. As long as you provide professional advice, you can be sued by your clients. Most people downplay the possibility of being sued, until they end up actually facing a lawsuit demanding hundreds of thousands of dollars. In such situations, most people will say they could never have seen the lawsuit coming. But lawyers and liability insurance brokers will tell you differently, because lawyers and brokers see such lawsuits occurring so commonly to businesses of all stripes and sizes.

#4. Where’s the best place to get short term professional indemnity insurance?

Provide offers both annual and short term professional indemnity policies. With Provide, you’ll save up to 25% on your premiums. Our online operating model creates lower overheads, so we pass every dollar saved back to you. Get online quotes for professional indemnity insurance now!

Get your Professional Indemnity Insurance quote. Lowest prices in Singapore. Expert advisors to ensure maximum protection.