Professional indemnity insurance for IT consultants
As an IT consultant you may be involved in a number of different areas of expertise - cyber, integration, migration, etc. - bearing a certain level of responsibility. That comes with risks which is why professional indemnity insurance for IT consultants is a critical cover whether or not required by a contract.
Our guide to insurance for IT consultants
Why is IT consultancy insurance important?
Technology sits at the heart of most business these days and the role of an IT consultant is usually strategic to any client who hires one.
If you are working in that role, either as a contractor or delivering services as a company, it is likely that your clients rely on you for advice, direction and expertise they themselves lack. And they expect that what you deliver will just work. Of course this is not always the case and that is when disputes may arise.
The list of reasons is extensive but the main causes for disputes usually revolve around the following:
- Unclear briefs: mismatch between your understanding of what is in scope and the client’s expectations
- More work required for free to rectify an issue, either as a result of the above or a mistake
- Demands of compensation due to delays, errors, or incomplete work causing financial losses
- Leak of sensitive or confidential information
In IT consultancy the risk of facing one of the above or another issue resulting from providing advice in the technology space has increased directly in line with the uptake of technology in pretty much every industry.
How does professional indemnity insurance for IT consultants work?
When a complicated situation arises, there is a threat to your bank balance due to the defence legal costs you’ll incur, a possible compensation payout and the loss of future work as a result of the time required to resolve the issue.
The stress elements is also a life changing factor. Though work related it can have a negative effect on the rest of your life.
A good professional indemnity cover is first and foremost a peace of mind. Typically when you make the call or send the first notification to your insurers, they will review your case and appoint the right legal advisor to walk you through the next steps or act on your behalf if appropriate. This is usually very helpful to your state of mind as you are receiving support from someone who has done this before but also saves a lot of your time. Your legal representative will usually conduct all the correspondence and negotiations.
Knowing that you can rely on experienced legal experts to take on your defence and on your insurers to deal with the costs, you can get on with your job.
If you decide to buy professional indemnity insurance, make sure you understand the claim process before purchase. All of us hope we will never need a reason to call our insurers but when we do, we want to be confident that they can deal with the claim efficiently. This is ever more important when it comes to legal threats to your business or work.
IT consultants often set up limited companies which can place them in the grey area of the IR35 legislation. This is why Suited professional indemnity cover also includes £100,000 of legal expenses that can help with the cost of tax investigations.
What you should consider before buying professional indemnity insurance
When required to have professional indemnity insurance by contract, IT consultants tend to do a quick internet search and pick the cheapest. However, as explained above this legal cover can play a vital role if you find yourself in a legal dispute with your client.
Limit of liability (indemnity)
Often enough IT consultants require to hold professional indemnity insurance and the contract will stipulate what the limit of the policy should be. There are other considerations before deciding how much PI insurance you need.
Claims process
Knowing exactly what would happen if you needed to defend yourself against a client accusation of negligence or a professional mistake is paramount. You don’t want to be caught short by not having followed procedure or fulfilling certain requirements of your policy. The insurance provide you select to purchase should have this information easily accesible before you buy.
Insurers rating
It is often tempting to purchase the cheapest deal on the market. However, double check not just who you are buying from but the actual insurers underwriting your policy. This information should be made very clear to you before purchase.
Future changes
From time to time updates to your personal or business details are needed. Make sure you understand whether there are associated costs. This goes for cancellations too. Will you have to pay a fee and will you have to give 30 day notice rather than just be able to cancel immediately?
Hibernation option
IT consultants in particular are exposed to risks of their past work. Technology mistakes can sometimes take months or even years to uncover. If you are not planning to take on another contract straight away, you may want to stay insured for your past work rather than cancel your professional indemnity insurance.
Your insurance provider should be able to offer you a ‘hibernation’ option to help you save money and then change back to a full cover as and when you are back at work. With Suited do exactly from the comfort of the DIY customer portal.
Common Questions
How much does professional indemnity cover cost?
Suited asks only a few simple questions (nothing personal) before you get to see the price.
What is not covered by professional indemnity insurance?
You need to remember that PI cover protects from claims of professional negligence or error. Therefore any other issues such as your liability to your employees, the public or third party property won’t be covered. The same applies to cyber risks.
What does ‘claims made’ basis mean in professional indemnity insurance?
It means that you can only make a claim if you have an active policy at the time of making a claim and the claim relates to work that you carried out within the policy period.
What is ‘run off’ cover?
When a contract ends, the liability for the work you have delivered still exists and you may be either contractually required or wish to keep professional indemnity insurance in place for a little while longer. In Suited we call this option ‘hibernation’ which means you can change your PI cover to stay insured the past only at a much reduced price if you are not planning to take on another contract.
What is retroactive cover?
That is cover for your past work. When you apply for professional indemnity insurance, you will be asked whether you wish to specify a retroactive date, meaning if you would like your cover to start at a certain date in the past. If you are switching from one insurer to another, the new insurer will generally provide the same retroactive date that applied to the previous policy. If you have never been insured, you might still backdate your cover with some insurance providers. Suited is one of them.
Does Suited professional indemnity cover subcontractors work?
Yes. Always make sure that you have a contract with your subcontractors, scope the work and do not waive your right of recovery in the event of a mistake or dispute.
Covers we offer
Suited small business owner and freelancer insurance starts with professional indemnity. It’s our core cover. With that you can also get public liability and a couple of other helpful insurance add-ons for a solid protection of your business.
Recent articles
What does ‘hibernate’ mean in professional indemnity insurance?
Imagine you’ve just delivered the last piece of work for your client and plan to take some time off, perhaps for good. Cancelling your professional indemnity cover is an option but not a very good one. The work you did in the past may still catch up with you in the future and since professional indemnity insurance (PI) works on a ‘claims made basis’, you won’t be able to access its benefits unless you have an active PI cover in place.
What is a retroactive date in professional indemnity insurance?
A retroactive date is a line in the sand which determines a specific point in the past from which your insurers have agreed to insure your business. You are effectively allowed by some insurers to backdate your professional indemnity (PI) cover so that your business is protected against possible claims as a result of your past work.
Is professional indemnity insurance the same as public liability insurance?
In short, no. It isn’t. Professional indemnity and public liability insurance are both legal covers, meaning you’re protecting yourself and your business against legal threats from clients and third parties. However, there are subtle differences and whether you need one, the other or both does depend on your business activities.
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