5 reasons freelancers in tech need professional indemnity insurance
With more and more IT professionals choosing to work as contractors rather than in long term roles, insuring yourself against the risks in the IT industry has never been so important.
IT contractors face a whole range of risks, even if they are not immediately obvious. Coding errors, failure to deliver projects on time or breaches of contract are just some of the claims that have cost IT contractors much more than an unhappy client.
Why do I need professional indemnity insurance for IT contractors?
Professional indemnity, or PI insurance, is designed to protect freelancers or contractors from claims made against them by unhappy clients. These clients may claim against you for alleged financial losses due to mistakes or failures in your work, damages, or injury that result from advice that you have provided, loss of important documents or data, or infringement of intellectual property.
So why have professional indemnity insurance as part of your portfolio? Put simply, as a professional IT contractor, you face a wide variety of potential risks. And if you’re not prepared for them with suitable insurance cover, you could find yourself with hefty legal fees and compensation claims.
To highlight the importance of PI insurance for IT contractors, here are 5 reasons why it is vital to arrange the right cover for your business.
1. No insurance, no contract
Many contracts require you to have professional indemnity insurance, limiting the cost to the employer if you do make a mistake. Clients may be reluctant (or even refuse) to hire you without IT contractor professional indemnity insurance. To have the best chance of getting a contract, arranging professional indemnity insurance is a necessity.
2. Claims can bankrupt IT contractors
A claim for an error or omission in a project could cost anything from a few hundred pounds to hundreds of thousands. If you are uninsured, you will have to foot the bill for legal fees and compensation which could leave your financial situation vulnerable in the event of a claim.
3. Mistakes can happen
Regardless of how many years’ experience you might have, it is impossible to know what could happen on the next project; it only takes one mistake for a claim to occur. One of the most important professional indemnity insurance benefits is the complete peace of mind that comes from buying insurance that will cover, you should an allegation arise concerning a mistake in your work. When it comes to mistakes and errors that result in injury or damage to third parties, public liability insurance is a vital form of cover to protect you against any resulting claims.
4. Most employment agencies won't cover you
One important, but not immediately obvious reason as to why professional indemnity insurance is needed, is employment agencies. While they can help find your next contract, their insurance is unlikely to cover the work you carry out on a project. Be sure to check whether you need to arrange your own insurance before you start the contract.
5. Protect against the unforeseen
Having a laptop and its accessories stolen would not only cost you hundreds of pounds but could also delay time sensitive work for clients. This could put serious strain on the relationship and lead to a claim for failing to deliver a project on time. Even worse, if there is confidential data belonging to the client on the stolen laptop, they could make a claim against you for negligence. Being aware of these business risks for IT professionals, and getting adequate cover in place, can ensure that you’re protected from such claims.
Arrange your own IT contractor insurance with Markel Direct. Get an online quote now or speak to an expert on 0333 242 9707.
FAQs
Why do I need to have professional indemnity insurance as an IT contractor?
Professional indemnity insurance is a wise choice as an IT contractor. Claims made against you by clients can run up high legal and compensation costs, potentially leaving you and your business in a dangerous financial situation. Even a genuine mistake made in your work can lead to a claim so, as an IT contractor, it’s important that you consider this form of insurance cover.
Is it a legal requirement to have professional indemnity insurance for IT contractors
No, PI insurance is not a legal requirement for IT contractors in the UK. However, many clients will insist on you having it in place before offering you work. And while it’s not a legal obligation to have professional indemnity insurance in place, it’s recommended thanks to the protection it gives you against a multitude of potential claims made against you by clients who allege negligence, poor work and errors, data breaches and losses, and more.
What are the benefits of professional indemnity insurance for IT freelancers?
Professional indemnity insurance covers IT freelancers against a number of potential claims against them, which could be both financially crippling and hugely damaging to their reputation. It can cover against legal costs and any damages awarded, and protect against specific risks such as alleged bad advice or work, along with any data breaches or losses. It’s also worth noting that many clients will require you to have PI insurance cover before they will work with you.
Do IT freelancers need professional indemnity insurance?
Yes, it’s certainly a good idea to have professional indemnity insurance in place to ensure that you are fully protected against the risk of claims and damages from clients. You’ll also find it more likely that you get hired for projects with employers who stipulate that you need to have PI insurance in place before an offer can be made – it’s all about them being able to trust and have confidence in you. So, is professional indemnity worth it? Well, with the right cover in place, you’ll benefit from peace of mind, with the knowledge that you can carry out your IT contracting work without worry.