ProfessionaI Indemnity Insurance for IT contractors – things to look out for

Professional Indemnity (PI) insurance is an important consideration if you provide professional advice to clients via your own limited company.

Simply put, it provides coverage for your company in case any issues arise as a result of the work you have carried out for a client.

Here are some of the key scenarios that PI insurance will protect you against:

What scenarios will PII protect you from?

Many IT contractors have PI cover in place. Not only is it a sensible move in an industry where mistakes can be costly, but many clients and agencies stipulate that you need to have this type of insurance in place, as a condition of the contract.

Here are the key scenarios that PI insurance will typically cover:

• Negligence: If you provide incorrect advice to a client or make significant errors in your work, PI insurance will cover the costs of correcting those mistakes and any damages that may result. This type of coverage is essential for professionals who want to protect their reputations and avoid financial losses.
• Intellectual Property Infringement: If you misuse IP rights, such as trademarks or copyrights, while working for a client, PI insurance will cover the costs of defending any legal action that may result. This type of coverage is especially important for professionals who work in industries where intellectual property is a significant concern.
• Data/Document Loss: If important data is stolen, destroyed, or lost, PI insurance will cover the costs of restoring the data and any damages that may result. This type of coverage is essential for professionals who handle sensitive information and want to protect their clients’ data.
• Dishonesty: If funds belonging to a client are misappropriated, PI insurance will cover the costs of resolving the situation and any damages that may result. This type of coverage is essential for professionals who handle money and want to protect their clients’ financial interests.
• Defamation: If you’re accused of libel or slander, PI insurance will cover the costs of defending against the allegations and any damages that may result. This type of coverage is essential for professionals who work in industries where reputation is a significant concern.
• Software and Hardware: If there is a dispute with deliverables, PI insurance will cover the costs of resolving the situation and any damages that may result. This type of coverage is essential for professionals who work in software and hardware development and want to protect their clients’ interests.

Importantly, most PI policies also cover any legal and defence costs that may arise as a result of a claim, subject to pre-agreed limits.

Things to consider when buying professional indemnity cover

• How much cover should you have?: Most PI insurers offer coverage in increments from £100,000 to £2 million and more if necessary. It’s important to check the contract terms and make sure you have adequate coverage for your specific needs.
• Package Deals: You may be able to save money by purchasing all the policies you need as a package deal. This could include public and employers liability coverage or business equipment coverage, for example. Many contractor insurers will bundle liability insurance and PI together.
• Retroactive Cover: You may be able to get retroactive cover, which protects you against any claims from work you’ve done in the past, often back to the date your consultancy or contracting business was established.
• Run-off Cover: If you’re leaving the profession or retiring, you can get “Run-off cover,” which covers you in the event of a claim made against you for past mistakes. This type of coverage provides peace of mind and protects your finances even after you’ve left the industry.

Further information about PI insurance

Here are some useful resources to find out more about PII:

• You can get an instant online quote for professional indemnity insurance from our insurance partner, Qdos. We have worked with Qdos for over 15 years at Bytestart. They are the UK’s leading insurer for IT contractors and consultants.
• The Financial Conduct Authority (FCA): The FCA is the main regulatory body for financial services in the UK, and they provide guidance on professional indemnity insurance for financial services firms. You can find their guidance here.