Professional indemnity insurance for IT contractors

For an IT contractor professional indemnity insurance is often a contractual obligation which usually dictates the PI limit required as well as the number of years the PI cover has to stay active.

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Our guide to insurance for IT contractors

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WHY GET COVER

Why is insurance for IT contractors important?

Professional indemnity insurance isn't just about satisfying a contract condition. It is in fact a useful legal cover in case something does go wrong with your work. In the field of technology you face many risks on a daily basis.

Your mistake can lead to a data leak, system failure, the wrong choice of software, project delays and more. If your error costs your client money, they will want to recover their financial loss from you. That's why they told you to get a PI cover in the first place.

Hopefully you're not one of those contractors who straight after finishing a contract cancelled their PI insurance. Because if you are, the problem lands firmly on your shoulders and the associated cost of a solicitor to rebuff your client's accusations can easily run into thousands of pounds. On the other hand if you still have a PI cover in place, hopefully you'll have access to early qualified legal help that will guide you through the situation.

HOW DOES IT WORK

How does professional indemnity insurance protect IT contractors?

The benefits of a good PI cover should be several fold. While the promise of legal costs reimbursement and compensation payout is comforting, it’s not quite enough when you face an angry demand from an existing or former client. These are stressful situations you don’t need or want in your life.

This is why Suited PI insurance doesn't just cover the financial risks associated with a possible claim against you. In addition it does provide immediate assistance from a specialised law firm that has a relevant and long standing experience in handling professional indemnity claims. They will take your case on from the outset and handle the situation for you. They'll liaise with your insurer when needed to resolve the dispute as soon as possible and ideally out of court.

Over the years plenty of IT contractors got caught out by not having PI cover for their past work. Technology mistakes don't always demonstrate themselves straight away and it could be months before serious errors are discovered. Don't be one of those contractors who, for the sake of saving a few pounds, risk losing their hard earned money. Even if you've finished your contract and aren't currently contracting, keep your IT contractor insurance in place.

If you choose Suited, you'll have the option to 'hibernate' your PI cover. Meaning you'll pay a much reduced monthly price while staying covered for the work you've done in the past. How long you keep your PI cover in a hibernate mode will depend on your circumstances, contract terms, and the nature of your past projects. With Suited you can hibernate your PI cover for as long as you need, you can cancel it when it's right or you can turn it back up to full if you're contracting again.

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Limits

How much PI insurance do IT contractors need?

As mentioned above, the minimum PI limit requirement is often dictated by your work contract. If you haven't received it yet, ask your client or the agency for the details so that you have enough time to explore your options. You should know how much of PI cover is required, whether the limit needs to be "any one loss" and how long you'll need to keep the cover in place after you finish the contract.

  • PI limit - in the IT world contracts usually require a specific amount starting from £1,000,000 going all the way up to £10,000,000. The higher the limit, the higher the insurance cost. You should always consider whether the required PI limit is an appropriate amount for the work you will be delivering. You'd be surprised how often you can renegotiate this element of your contract.

    If you contract doesn't state that you need professional indemnity insurance but you're keen to protect yourself and your business anyway, consider your level of input and responsibility for the project/programme. The other thing to look for is any mention of liability in your contract. Usually there is a clause to that extent and it should help you decide how much of PI insurance you need.
  • Any one loss vs in the aggregate - IT contracts rarely stipulate whether the PI limit can or cannot be 'in the aggregate'. In the aggregate limit is a cover restriction which means that irrespective of the number claims you make during the period of insurance, you are only covered up to the policy limit across all claims. For example if you've bought a £1,000,000 PI policy and your first claim was £800,000, you only have £200,000 of PI cover remaining until your insurance renewal. Some IT contracts may require that your PI insurance is on an "any one loss" basis which means PI cover up to the full policy limit per every claim.

  • Number of years - some IT contracts demand that you stay insured for up 6 years after you finished your contract. Again this can be negotiated down. However, if it's set in stone and you end up with this condition in your contract, choose your PI insurance provider carefully. You want to have the flexibility of being able to switch to past work only cover (run off cover) easily if you decide to pause or leave contracting.
FAQs

Common Questions

Can I get my past work covered by Suited PI insurance?

Yes, Suited offers a retroactive cover option. When buying your PI insurance, select the date from which you'd like to be covered and it will show on your policy schedule as the "retroactive date".

Will the work of my subcontractors be covered by Suited professional indemnity insurance?

Yes, any work by subcontractors of your business is covered, however, do not waive your rights to hold them liable and you should insist that they have PI insurance.

Do IT contractors need public liability insurance?

That depends whether you come into a regular face to face contact with your clients, handle their property (computer hardware, etc) or deliver your services outside your usual place of work, for example at your client's premises. If any of the above applies to your business then you may wish to consider public liability insurance to additionally protect your business against any mishaps such as causing an injury or property damage.

How is the cost of Professional Indemnity insurance calculated?

At Suited we only take into account your annual turnover, that's it. We do not charge per person.

Does Suited PI insurance include cyber cover?

No. Cyber insurance is a complex specialist product which should be bought from insurance providers with the right expertise.

Does Suited offer a run off PI cover?

Suited offers the option to hibernate your PI cover which means you'll stay insured for your past work but pay less premium.

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