Q & A – Professional Indemnity Insurance
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.
Q. I am a Contractor do I need PI insurance?
A. Most Contractors will have some form of contract which in most cases will stipulate that you require a certain level of PI Insurance in place. This is usually tied in with clauses that make you responsible financially to put right any errors or mistakes.
Q. What level of indemnity should my PI insurance have?
A. More often than not the contract will stipulate the level of PI insurance cover required. You should however ensure that the level indicated is sufficient for your needs. If your PI insurance cover is not adequate you will be financially liable for any excess. Your insurance broker may be able to advise on what level of PI insurance you require.
Q. Should I continue to pay my PI insurance premium if my contract ceases?
A. Depending on what it is you do you should consider continuing with the cover for a period of time to protect you against any retrospective claims. These are claims against your PI insurance policy in respect of events that are only discovered later on. If you don’t continue with your PI insurance payments you could be financially liable.
Q. Will my PI insurance cover a substitute if I use one?
A. Your PI insurance broker will need to ensure that the cover extends to another individual, don’t automatically assume it will.
Q. I am a contractor who works for several different companies, will I need to take out a PI insurance policy for each engagement?
A. NO but you will need to ensure that the cover you have in place covers all the types of work you expect to do.
Q. What happens if during the course of my contract I am asked to do other work, can I change my PI insurance part way through?
A. If you contact your PI insurance provider and tell them what the new work is you are doing they will be able to confirm whether or not it is covered. If not they will more than likely be able to make an adjustment which may involve an increase in premium.