Risk Tip - Project Policy Required, Practice Policy Recommended
By: Drew Rothman
Our team fields daily requests from our clients seeking to place coverage that insured’s have never maintained but now must due to contract requirements. There are multiple reasons the insured would likely benefit from a practice policy rather than simply addressing risk via a project-specific policy.
First, the same coverage required by a contract is often available to the insured in the form of a practice policy for minimal additional premium as compared to that associated with the project-specific policy. It is understandable when an insured wants to pay the lowest possible premium in order to maximize profit margin. However, if they are going to spend money, they might as well have lasting protection for their other work once the project at issue is completed.
Secondly, if an insured is working on a project that requires pollution and/or professional coverage, the insured is most likely working on projects daily that carry pollution and/or professional risk. Insureds may not realize that they need a particular type of coverage until it is required of them. Insureds may say, and reasonably believe, “I don’t even need this coverage, I have no exposure!”
You may be wondering – what about a situation where a dedicated limit is required by the contract? Such scenarios do come up, and can often be addressed by adding the required limits to an existing practice policy via endorsement. Various circumstances can arise that require adaptation, but having the practice policy as a base is an advisable approach for most insureds.
It is our job to educate insureds who do not maintain professional or pollution coverage, and to advise them that the potentially minimal additional premium associated with an annual practice policy, for all of their work, is worthwhile as compared to saving a few bucks and placing a project-policy only.