What is indemnity?
The word indemnity is defined as “security or protection against a loss or other financial burden” or “exemption from legal responsibility for one's actions”. So when you pay an insurance premium the insurer is indemnifying you for the events covered by the policy, whether this is property damage or financial loss.
When you hear the term “indemnity insurance”, it most likely refers to errors & omissions indemnity or professional indemnity insurance. These both mean the same thing and provide cover for the financial loss another party experiences because of your actions. It doesn’t cover losses that result from physical damage, because this is covered by public liability (also known as general or broadform liability). Indemnity insurance is common among professions such as engineers, architects and lawyers, where their expert opinions are relied upon and getting it wrong could be costly.
Is it important for builders?
Under the Building Act builders have a duty of care to build something that is fit for purpose and they are increasingly being held responsible for their own expertise. This includes project management, site supervision and their ability to precisely follow designs & specifications. Making a mistake in this area could be costly and this is why errors & omissions indemnity is recommended for builders.