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If you have just started out as an IT contractor, chances are your first agency or client has mentioned you might need professional indemnity, or PI insurance. Or you might be contracting direct with a client and just want the peace of mind of knowing you are protected by a PI insurance policy if something were to go wrong.
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Contractor professional indemnity, or PI insurance, is one insurance policy every contractor must have, but hope never to use. Here are ten basic steps you can take to minimise the chances of having to activate your PI insurance:
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There are a wide range of freelance and contractor roles out there. Fortunately, there is also insurance cover for those professions, in the unlikely event of something going wrong. Qdos Status Services Ltd specialise in helping and advising freelance contractors all over the UK, as well as providing a range of unique insurance products to suit their needs. One of their most successful insurance products is PI Insurance – here we look at a few of the professions who will be required to obtain PI Insurance, as well as a few reasons why it is so important for them.
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The majority of limited company contractors will hold some form of indemnity or liability insurance. These will differ depending on the type of work you are doing and the specific client you are working for.
We have put the following FAQ guide together, which should be of assistance when considering which policies you should purchase.
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Put simply, Professional Indemnity Insurance (PII) is designed to cover claims made against you for professional negligence.
For example, if you are doing some coding work and somehow bring down your client’s system meaning they suffered a financial loss, they could sue you. Your Professional Indemnity policy would react and cover the defence costs and then any damages should you eventually be found liable.
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Employers Liability insurance covers claims made against you by employees or subcontractors of your company.
If you are a typical ‘one man band’ company, either employing just yourself or yourself and our spouse, the likelihood of any claims is clearly negligible. However, many contractors do hold the policy because it is commonly required by recruitment agencies and end clients. It also helps to show that you are operating a ‘genuine business’ for IR35 purposes.
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Q. Will PI insurance help with my IR35 status?
A. When HMRC carry out a status enquiry they will consider a number of factors one of which is are you in business on your own account. Employees don’t have to carry PI insurance as they will be covered by the employers own PI insurance policy. This helps Contractors demonstrate that they are in business on their own account and are protecting themselves against any financial risk if they make a mistake. PI insurance will cover any genuine errors subject to any agreed excesses.
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Why Contractor Professional Indemnity Insurance is essential...
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Public Liability Insurance covers damage and injury to third parties. It will cover the defence costs and damages if someone brings a claim against you.
For example, if you were working on a client’s site and someone tripped over a wire that you had left, they could sue you if they were injured. The policy would cover the legal costs and the damages if you are found liable. Likewise, if you damaged some of your client’s equipment it would also be covered.
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As a contractor or freelancer, you only get paid if you work. If you are ill or have an accident you can’t invoice your client. You can purchase accident and sickness policies to cover this risk, but what happens if you get selected for jury service?
Members of the public are selected for jury service at random and you obviously have no control over the length of time you will serve.
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