What is indemnity to principal insurance?

An Indemnity to Principle clause is included in most liability insurance policies and is often a requirement which is stipulated in contracts. Indemnity to Principles is usually found in insurance cover for contractors and is particularly prominent in the construction industry. However, despite its wide-spread application, it remains a clause which is often not fully understood.

Indemnity to Principals protects the principal (which is usually the end customer) or the principal contractor by outlining that if a claim is paid, the beneficiary of the policy will not necessarily be the policyholder but instead the third party who has suffered the damage or injury. In essence, the clause outlines that while the policyholder is taking out the policy and paying the premium, it is not necessarily the policyholder who would receive the claims payouts from the policy – they are essentially buying protection.

Many contractors wrongly assume this cover will come under their Professional Indemnity policy, but this is not the case. Professional Indemnity provides cover if it is alleged that you have been negligent in respect of design, advice or specification of work where you assume a professional duty of care.

If you are a contractor and you have any contractual requirements you do not fully understand in respect of your insurance cover, please get in touch on 01634 686444 or email info@firstins.co.uk