If you’re starting out as a contractor, chances are you will be obliged to take out some kind of business insurance as a condition of your contract. Typically, clients will expect third party contractors to be covered for business liability and professional indemnity.
Most umbrella companies provide blanket insurance cover for their employees, but if you’re a limited company contractor, the responsibility for taking out the right insurance policy is your own. In this article, we will explain what eventualities PI cover will protect you against, and how to find good quality cover without breaking the bank.
What is Professional Indemnity Insurance?
You are likely to need this type of cover if you provide professional advice to your clients, or provide a professional services which could potentially be challenged by a dissatisfied client.
PII will provide professional representation, and pay for damages if a client successfully sues you for a variety of mistakes you may make during your career as a contractor, including:
- Negligence – e.g. you provide incorrect advice, or make a mistake in your work.
- Unintentional breach of copyright or confidentiality.
- Loss of data
- Loss of documents
- Breach of contract, such as in the supply of software and hardware to a client.
How to select the right type of PI policy
- If you’re contracting via an umbrella company, you will usually be covered by the scheme provider’s insurance policy. You should check that the policy covers your specific skill area, and to the extent stipulated in your contract.
- For limited company contractors, there are a number of reputable providers who specialise in providing insurance products to the contracting community.
- Clients will often stipulate their minimum level of required cover before you can start work. Cover is available from £100,000 to £2m and more if necessary. Unsurprisingly, you can expect to pay more for higher levels of cover,
- In general, you will often find the best deal by purchasing an ‘all in one’ policy, which covers business liability (public and employers’) insurance, as well as professional indemnity cover.
- Again, most technical areas will be covered by standard contractor PI policies, but you may need to ask for a custom policy to be created for you if you undertake unusual or highly specialist work.
- A ‘retroactive’ policy is designed to provide you with cover from the date when you started contracting (i.e. a date in the past). Providing you have no outstanding claims, or knowledge of a potential claim, it is wise to bolt on a retroactive element to your policy.
- Further down the line, you may wish to take out ‘run off’ cover, which will protect you against past claims for several years after you decide to retire, or take a break from your contracting career.
Specialist contractor insurance providers
We work closely with two specialist insurers who provide tailored professional indemnity insurance for contractors.
For a real-time quote, and for further information, try our long-term insurance partner Hiscox.