Originally published February 24, 2022. Last updated September 22, 2026.

Everything has its limits and insurance is no exception. Architects, engineers, construction managers and other professionals in the AEC space can face significant risks when choosing the limits of their professional liability insurance.

Without adequate insurance limits, you risk being underinsured, which can put your business, clients and projects at risk. And with the cost of construction and professional liability claims continuing to rise, limits that seemed adequate just a few years ago may deserve another look today.

Here’s what to know about insurance limits in the AEC industry, including how policy limits work and how to ensure your choice of limits is appropriate for the risk your business faces.

What Is an Insurance Limit and Why Does It Matter?

An insurance limit is the maximum amount an insurer will pay for a covered loss, subject to the terms and conditions of the policy.

Insurance policies typically come with several different types of limits. The most common pairing is a per-claim limit and an aggregate limit. The contrast between such limits can be stark, from a numeric difference to the way they affect a policy and apply to any potential claims.

Knowing and understanding your policy limits helps you answer an important question for your firm:

• How much financial protection would your business actually have if a significant professional liability claim occurred?

Per-Claim Limits and Aggregate Limits and Their Differences

Two of the most important types of insurance limits to familiarize yourself with are per-claim and aggregate limits.

• Per-claim limit: The maximum amount of coverage available for a single covered claim, subject to the terms of the policy.
• Aggregate limit: The maximum amount the policy will pay for all covered claims during the policy period, typically one year.

These limits are generally displayed together. For example, a policy might say it has limits of $2,000,000/$4,000,000.¹ In that case:

• Up to $2 million would be available for a single covered claim.
• Up to $4 million would be available for all covered claims during the policy period.

With an understanding of pre-claim and aggregate limits, you can get a quick picture of the protection available under a policy. Even so, it’s important to understand how those limits can be exceeded, exhausted and eroded.

How Can Insurance Limits Be Exceeded, Exhausted and Eroded?

Even if you know your professional liability limits, a large claim or several claims during the same year could exceed them.

The costs can add up in one of several ways:

1. One significant claim exceeds the per-claim limit.
2. Several claims exhaust the annual aggregate limit.
3. Defense costs reduce an eroding limit before a claim is fully resolved.

Today’s claims environment makes each scenario worth considering. Insurers report increasing AEC claim severity as well as higher defense expenses associated with factors such as expert witnesses, electronic discovery, attorney fees and longer resolution times.

Here’s how each scenario could play out.²

1. What Happens If a Claim Exceeds Your Per-Claim Limit?

Imagine that an error in your work requires a portion of a parking garage to be removed and rebuilt at a cost of $2.5 million.

However, your professional liability insurance carries a per-claim limit of only $2 million, resulting in a $500,000 cost that exceeds the policy’s pre-claim limit.

Depending on the facts of the claim and the terms of the policy, your firm could be held responsible for the costs above the available insurance limit. That shortfall can expose business assets to risk and add complexity to the dispute, which may already involve the client, contractor and other project stakeholders.

Claims scenarios like this are becoming more common, in part, due to rising construction costs. The takeaway is this:

• A limit that once comfortably surpassed the expected cost of correcting a design problem may offer a smaller cushion and could be exceeded as construction costs rise.

2. What Happens If Multiple Claims Exceed Your Aggregate Limit?

Or imagine that your firm experiences three separate covered claims during the same policy period:

• Claim 1: $1.5 million
• Claim 2: $1.4 million
• Claim 3: $1.6 million

Your professional liability policy has limits of $2 million per claim/$4 million aggregate. While each individual claim is below the $2 million per-claim limit, together the three claims total $4.5 million.

After $4 million in covered amounts exhausts the aggregate limit, $500,000 in costs would remain, subject to the specific policy terms and how covered costs are applied.

Your firm could therefore find itself without insurance funds available for the remaining $500,000 of the third claim. The lesson in this scenario:

• Experiencing claims that stay below the per-claim limit does not necessarily mean you’ll have enough insurance. Several claims in the same policy year could exhaust the policy’s aggregate limit, if it is not high enough.

3. How Can Defense Costs Erode Your Professional Liability Limit?

Finally, imagine that a dissatisfied architecture client files a lawsuit against you seeking $7.5 million in damages. Your firm believes its work met the applicable standard of care and has documentation supporting its position. Eventually, a settlement of $1,000,000 — far less than the original claim — is reached between the parties. However, your legal defense and expert costs totaled an additional $1,250,000, for a total cost of $2,250,000.

Your policy has limits of $2 million per claim and $4 million aggregate and, under the terms of your policy, defense expenses reduce the applicable limit.

At a total cost of $2.25 million, the total claim cost is $250,000 greater than the policy’s $2 million limit.

This example highlights an often-missed risk:

• You do not necessarily have to lose a multimillion-dollar case for your professional liability limit to become an issue. Defending a claim can itself consume a substantial portion of the available insurance, especially today.

Why Your Insurance Limits Might Be Too Low Today?

Insurance limits are rarely a “set it and forget it” type of decision. That’s because a number of factors can change the amount of insurance protection your AEC firm needs over time.

Consider the impact it could have on your claim if…

Construction Costs Rise.

When repairing an alleged design error involves removing, replacing or rebuilding work, higher labor and material costs can increase the financial consequences of a claim.

Claims Become More Severe.

The dollar value of professional liability claims is another concern. Carriers report increasing claim severity, with claims taking longer and becoming more expensive to resolve.

Defense Costs Consume Your Limits.

Professional liability cases involving design professionals can be complex. Legal fees, expert expenses and other defense costs due to a more extensive discovery phase may reduce the limits available to pay a judgment or settlement.

Your Business Has Changed.

Even without broader inflation, the limits your firm selected several years ago may no longer reflect your current exposure.

For example, consider whether your firm is now:

• Working on larger projects.
• Providing additional professional services.
• Working in higher-risk disciplines or project types.
• Taking on projects with larger construction values.
• Working with new clients or contractual requirements.
• Taking on more projects each year.
• Working in additional states or jurisdictions.

Any of these changes could be a reason to revisit your limits with an insurance professional.

How Can You Find Your Current Professional Liability Limits?

With the risk that low limits can introduce into your design business, knowing what your current limits are on your existing policy is key. It’s the first step for determining whether your limits are adequate or whether you need to adjust them.

Here’s what to check on your insurance policy:

• Review the first page of your policy called the declarations page. This is a summary of your entire policy document.
• Locate your limits. Limits will be listed on the declarations page as a per-claim limit dollar amount followed by an aggregate limit dollar amount.
• Note the specific individual, corporate or group entities covered by the policy and any difference in the breadth of coverage or limits extended to each.
• Review your policy document. Check for key coverage, exclusions and definitions of terms.
• Read through the entire insurance agreement. The policy and its endorsements represent the broadest area of coverage.
• Check for exclusions. Exclusions to coverage represent situations under which coverage will not apply.
• Note any exceptions to the exclusions. Occasionally, there are exceptions to exclusions outlined in their own policy section.
• Follow cross-references. Policy provisions work together, so note all internally referenced sections for clarity on the full extent of your coverage.
• Lastly pay special attention to how defense costs are handled. Determine whether they reduce or are otherwise subject to your liability limits.

If anything is unclear, speak with your insurance representative rather than relying solely on the dollar amounts shown on the policy documentation.

How Do You Know How Much Professional Liability Insurance You Need?

There is no single professional liability limit that is appropriate for every architect, engineer, construction manager or other AEC professional. Instead, the simple answer is that it depends, and many factors contribute to arriving at a more exact number.

When evaluating your limits, be sure to consider:

• The size and value of your projects.
• The type of projects you work on.
• The professional services you provide.
• Your annual revenue and project volume.
• Your contractual insurance requirements.
• Your past claims experience.
• The possible cost to correct a design error.
• The potential cost of defending a professional liability claim.
• The amount your firm could reasonably afford to absorb if insurance limits were exhausted.

Today’s AEC professional liability environment provides a good reason to make this review routine. Rather than viewing your limits as a number to choose once and forget, consider reviewing them whenever your business, projects, contracts or risk profile changes.

What Should You Do If Your Insurance Limits Are Too Low?

Becoming knowledgeable about your insurance limits helps you make smarter risk management decisions. Limits give you a bird’s eye view of the insurance coverage you have and the risk you still shoulder.

If you discover your limits are too low, it’s best to take immediate action:

1. Review your current projects and contracts for insurance requirements and significant exposures.
2. Discuss your risk profile with an insurance professional.
3. Consider higher primary limits, if appropriate and available.
4. Ask whether excess coverage is appropriate for your business.
5. Continue to review your limits on a regular basis, especially as your projects and firm grow.

Adequate professional liability insurance is a must when you’re an architect, engineer, construction manager or other professional in the AEC industry. At Lockton Affinity, we understand the insurance needs of professionals like you.

The Lockton Affinity Architect + Engineer Insurance Program offers Professional Liability Insurance to a broad range of design professionals, including architects, engineers, contractors, landscapers and more. A host of coverage benefits are included, such as pre-claims assistance and free contract reviews, plus you’ll receive access to our best-in-class personalized service from our in-house insurance experts.

Learn more about our available coverages, call us at (888) 425-7011 to speak to a representative, or get started now with an online quote.

1. Note that this set of limits is given as an illustrative example, rather than a recommendation for every design firm. That’s because the appropriate professional liability limits for a firm can depend on a number of factors, such as services provided, annual revenue, project size and type, contractual requirements, risk profile and more. Plus, with the economic, legal and regulatory factors involved, firms would do well to periodically revisit their decision on a choice of limits.
2. Coverage descriptions are provided for general informational purposes only. Actual coverage is subject to the terms, conditions, exclusions and limits of the applicable policy.