So you’ve done it, made the leap and go it alone. As a contractor, you are now master of your own destiny and manager of your own business. But with that freedom comes the need to protect your business and make sure it can cope when times are tough. When you were working for a large company as a permanent employee that company gave you protection. As a contractor, you need to protect yourself – from all of the mishaps and accidents, unforeseen incidents and unlucky breaks that come as part and parcel of running any business. For this reason, all working contractors need to be certain they have put the right insurance policies in place and that they keep them up to date throughout their career. This includes the three main general insurances – public liability insurance, professional indemnity insurance and employers insurance – and any smaller policies that are applicable to your particular contracting industry. In this article, we will take a look at arguably the most important of these policies, professional indemnity insurance.
What Exactly Is Professional Indemnity Insurance for Contractors?
Professional indemnity insurance is perhaps one of the most important types of insurance that new contractors should be considered when choosing what cover to arrange. Often called PI insurance, professional indemnity is crucial for any contractors who offer services or provide advice to businesses and people in a professional capacity, as it covers their expenses and legal costs if someone makes a claim that their advice has been inadequate or their services have led to clients losing money. All professional indemnity policies will provide some kind of cover against claims for the following – negligence, breach of confidence, intellectual property infringement and defamation. A lot of policies will also provide this cover retroactively, meaning if you take it up after you have been contracting for a while it will still cover all the work you have already done.
Who Should Get Professional Indemnity Insurance for Contractors Then?
All contractors, freelancers and consultants should seriously think about getting it, but it is an absolute must for those self-employed workers whose job it is to provide ideas, services, advice or designs for their clients. If there is even the slightest chance of you giving someone bad advice or services (or even of being accused of giving bad advice or services) then it is essential to get yourself covered. Professional Indemnity insurance will stop you having to worry about frivolous (or real) claims and protect you if you need to raise legal costs or even pay out settlements. Contractors in the following industries should certainly be getting professional indemnity: Business and management consultants, Training and HR consultants, accountants, IT professionals (including developers, designers, programmers and consultants,) marketing and media consultants.
Is Professional Indemnity Insurance for Contractors Mandatory?
Not legally, no. But there are certain professions in which contractors are required to have professional indemnity insurance as part of their professional certification. These include law, surveying, town planning, accounting and architecture amongst others. Each of their professional bodies insists on at least a basic level of professional indemnity insurance to protect both the client and the contractor/freelancer.
How Much Does Professional Indemnity Insurance Cost?
Generally cover for professional indemnity will cost contractors roughly between £6 and £10 a month. It is worth shopping around though and comparing policies (with a list of all the features you are looking for) online before phoning and speaking to anyone.
Is Professional Indemnity Insurance Advantageous for Your Contracting Business?
Yes, absolutely. You will find that many contracts you are competing for will include a clause that the clients will only work with contractors who have this indemnity insurance in place. Having professional indemnity insurance will both provide an extra layer of appeal to your contracting business and stop you losing out on contracts where it is a requirement.
Do I Still Have to Get Professional Indemnity Insurance if I Have Public Liability Insurance?
Yes. Both are necessary because they do very different things. Public liability insurance will cover you for any claims that are made against you for injuries, accidents or illnesses (or damage to property) whereas as discussed above, professional indemnity insurance will cover you for advice, ideas or designs. Thankfully, most insurance companies will offer you a good deal on getting the two of them together in one package.
How Do I Work Out What Sort of Level of Insurance I Will Need?
Clearly, this will be dependent on the industry you contract within but generally, most contractors arrange cover for public liability at £1 million and for professional indemnity insurance at £10 million. You may also have to adjust this amount if you work for an agency or client who specifies a higher level of insurance is required.