Why Architects & Engineers Should Take Equity Interest Coverage

Engineers and architects are important in designing and creating all types of development projects. Therefore they are exposed to substantial risks. For this reason, they require liability insurance, such as Equity Interest Coverage. As lawyers require malpractice coverage, architects, engineers, structural design consultants, safety engineers, design build engineers and drafting professionals all require this type of cover.

This kind of profession is a very responsible position and there is much responsibility. Serious liabilities are incurred by engineers or architects for the smallest omission, oversight or error. Circumstances such as these call for being protected by a professional liability coverage policy.

Such a policy protects a firm or individual professional in the event of legal claims made against them for alleged negligence. Legal costs could be sizable and without cover, it can leave a professional in a state of financial ruin. However, it covers settlements, judgments and defense costs.

When an architect is a partner in a business, he or she would need equity interest insurance. Shareholders, when they buy stocks in a corporation, receive a share of the ownership of a business. It is the residual interest or claim or junior investors.

When a business starts out, owners invest funding into the venture. Liability is created in the form of capital. In accounting terms, a business is considered a sum of assets and liabilities. When liabilities have been taken care of, the positive balance that remains is the interest. It is important to understand this in the event of liquidation or bankruptcy.

Secured creditors will be paid out first in such an event. The other creditors, in sequence of priority, have the next claim on any residual proceeds. As an owner, you have the last claim, after all the creditors have been paid. Equity Interest Coverage is valuable in this event as it protects the interest of a shareholder in the event of bankruptcy.