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.
The following checklist will help you decide if you need PI insurance:
If you are an IT contractor with your own limited company delivering your services to clients, then your company is liable for the cost of legal expenses and compensation if you are sued for negligence. Could your company survive the legal costs and potentially significant compensation payments without PI insurance?
What might be the maximum financial loss your client could suffer if you made a mistake during an IT project you delivered? The level of IT contractor PI insurance typically available is £1m, £2m and £5m. You might find your agency or client specifies how much PI insurance cover you must have. You might be able to negotiate this down, but if it is a requirement of the contract, you must have the correct level of PI insurance.
If you have been delivering IT services for many years and never had PI insurance, or you are considering changing from your existing PI insurance provider, you may wish to consider retroactive cover. From a relatively small additional premium, you will have PI insurance cover for all your past contracts, as well as for current and future work.
Most PI insurance policies cover your contracting business worldwide, except North America. If you sign a contract with an IT client operating in the USA, Canada or Mexico, you will need to make special PI insurance arrangements, and may have to pay an additional premium.
And if you do receive a call from a client or letter from their lawyer claiming that your contractor limited company is to blame for an IT failure, then if you have a PI insurance policy you won’t need to panic. Your PI insurance documentation will include instructions on what to do, and it normally starts with letting your PI insurer know as soon as possible.