In the competitive world of security and alarm company insurance, acquiring adequate coverage is not as straightforward as it seems. Despite the critical nature of their work, many alarm companies across the UK make fundamental mistakes with their insurance policies that could prove catastrophic when claims arise.
Understanding these common pitfalls when choosing your next alarm company insurance provider can mean all the difference between a successful claim and a harsh penalty.
1. Underestimating Professional Indemnity Requirements
The Mistake:
Assuming that public liability insurance provides sufficient protection against all liability and underinsuring professional indemnity coverage for business operations.
Why It’s Dangerous:
Professional indemnity insurance covers financial losses clients suffer due to errors, omissions, or negligent advice. For alarm installers, this could include failing to connect systems to monitoring services properly, providing incorrect advice on system capabilities, or making inadequate design recommendations. Without PI coverage, even one uncovered claim could set back your company’s finances.
The Reality:
In the UK, professional indemnity insurance coverage for alarm installers typically ranges from £100,000 to £5 million. The limit you need depends on your client base and the potential financial impact of your mistakes. Higher limits are more expensive to cover than lower limits, but your client may require you to have a certain level of coverage before you can tender for their particular contract.
2. Ignoring the “Failure to Perform” Exclusion
The Mistake:
Relying on standard commercial general liability policies instead of specialist insurance, without understanding that general policies often contain a “Failure to Perform” exclusion.
Why It’s Critical:
Policies that include a “Failure to Perform” exclusion will mean you essentially have no efficacy cover for losses that occur as a result of your product or service failing to perform as warranted.
Real-World Impact:
Imagine a fire alarm system you installed fails to activate during an actual fire. Efficacy cover would help protect you in the event the building owner sues for damages. But if your policy contains a “Failure to Perform” exclusion, your insurer may refuse coverage, leaving you personally liable for damages. Our specialist alarm installer policy includes efficacy cover as standard across all our security and alarm company insurance policies, whilst standard business insurance policies often don’t.
3. Misunderstanding Employers’ Liability Requirements
The Mistake:
Some alarm installation businesses operate without proper employers’ liability insurance, particularly when using subcontractors, casual labour, or family members.
Legal Requirements:
If you employ people, you must have employers’ liability insurance to protect them in case of illness or injury. There’s one exception for family businesses that aren’t incorporated as a limited company.
Hidden Risks:
Subcontractors, apprentices, volunteers, and even casual workers would require employers’ liability insurance if you have them working under your supervision. including full-time, part-time staff, volunteers or apprentices, Operating without adequate employers’ liability insurance can result in fines of up to £2,500 per day for each employee not covered by the policy.
4. Overlooking Extended Reporting Periods
The Mistake:
Not understanding the importance of “tail coverage” or extended reporting periods when changing specialist insurance providers or retiring from business.
Why It Matters:
Errors and omissions insurance is subject to a particularly important clause called an extended reporting period, or sometimes “long-tail” coverage. Basically, without an extended reporting period, E&O insurance ends soon after an alarm company insurance policy is changed or cancelled.
The Risk:
Installation problems can surface years after completion. Without tail coverage, you could face uninsured claims for work performed while your original alarm company insurance policy was active.“
5. Insufficient Tools and Equipment Coverage
The Mistake:
Underinsuring tools and equipment or failing to understand coverage limitations for items stored in vehicles overnight.
The Reality:
The tools and equipment used by alarm installers are often specialised and expensive. Tools Insurance can provide coverage in case your tools are stolen or damaged. Policies may contain conditions that limit the amount and extent of cover provided.
Common Gaps:
Many policies restrict overnight coverage, require specific security measures, or exclude certain high-value items unless specifically declared. Choosing a specialist insurance provider that understands your business is essential in getting the right coverage.
6. Inadequate Contract Integration with Insurance
The Mistake:
Failing to align contract terms with insurance coverage, particularly regarding liability limitations and disclaimer clauses.
Best Practice:
A limitation of liability clause essentially says that, if a company is sued, the damages are limited to a certain amount, such as a specific monetary amount or current insurance coverage. Your contracts should work hand-in-hand with your insurance coverage.
Key Elements:
Include appropriate disclaimer notices, clearly define the scope of work, efficacy coverage, and ensure that limitation of liability clauses align with your insurance limits.
7. Choosing Price Over Proper Coverage
The Mistake:
Selecting alarm company insurance based purely on price rather than coverage adequacy and insurer expertise in the alarm installation sector.
Why Specialist Coverage Matters:
Generic business insurance may not understand the unique risks facing alarm installers. With over 30 years’ experience in the industry, we understand your concerns, risks and challenges. Our specialist insurance policies satisfy the insurance requirements from the security and alarm industry’s leading inspectorate bodies.
The Value of Expertise:
Specialist insurance offers policies tailored to alarm installers, including efficacy cover as standard, industry-specific policy wordings, and claims handlers who understand your business.
8. Failure to Update Coverage as Business Evolves
The Mistake:
Not reviewing and updating alarm company insurance coverage as the business grows, adds new services, or enters different markets.
Common Scenarios:
- Adding CCTV installation to burglar alarm services
- Expanding from residential to commercial clients
- Offering monitoring or maintenance contracts
- Using new technologies or smart home integration
The Solution:
If you find yourself in this situation, it’s important to update your policy before you take on this new work. If you don’t have the correct type of cover in place for the work you do, you may be unable to claim on your policy if something goes wrong.
9. Delaying Claims Notification
The Mistake:
Waiting too long to notify insurers of potential claims or incidents.
Why Speed Matters:
The most common mistake made by insurance claim filers is that they wait too long to notify their insurance company of the issue. The moment an accident, loss, or professional indemnity issue happens, it’s vital that you alert your insurer immediately.
Professional Indemnity Considerations:
PI policies are written on a “claims made” basis, meaning coverage only applies to claims made during the policy period. Late notification could result in coverage denial.
Getting It Right: Key Recommendations
Work with Specialists: Choose specialist insurers who understand the alarm installation industry and offer policies specifically designed for your risks.
Regular Reviews: Conduct annual insurance reviews to ensure coverage keeps pace with your business growth and changing risk profile.
Understand Your Policies: Don’t just buy insurance, understand what’s covered and what isn’t. Ask questions and seek clarification on policy terms.
Integrate with Business Practices: Ensure your contracts, procedures, and insurance work together cohesively to provide maximum protection.
Plan for Claims: Establish immediate notification procedures and maintain good records to support potential claims.
The Bottom Line
Insurance mistakes can be catastrophically expensive for alarm installation companies. Understanding your specific risks and ensuring your coverage matches your business reality.
Remember: cheap insurance that doesn’t cover your risks isn’t a bargain, it’s a liability. Invest in proper coverage from insurers who understand your industry and regularly review your policies to ensure they evolve with your business.
The alarm systems you install protect your clients’ most valuable assets. Make sure your insurance properly protects you.