Does a contractor need professional indemnity insurance?

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Martin Baxter
15 Feb 2022 @ 01:21 pm
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Professional indemnity, along with public liability, is one of the key insurance covers that most UK limited company contractors will hold. For new contractors and even contractors that have been in the contracting game for years, we do often get asked why they need it, and what exactly it covers them against. We’ve got you covered with an overview of professional indemnity insurance and answers to common questions we get from contractors.

Does a limited company contractor need professional indemnity?

Professional indemnity insurance will often be a contractual requirement of your recruiter or agency, along with public liability and employers’ liability. This results in some contractors seeing insurance as a bit of a box-ticking exercise, paying little regard to what they are covered for. Read on for an overview of the situations when a contractor would need professional indemnity.

What is a professional indemnity insurance policy?

Professional indemnity, sometimes referred to as PI insurance or company liability insurance, is designed to protect you as a contractor from a variety of claims. This includes claims for professional negligence, loss of documents, loss of data, breach of intellectual property, defamation and libel.

In the event of a claim from your client, professional indemnity insurance would step in to help cover the compensation you have to pay, including any legal costs that are incurred in the process of the claim. Depending on your industry and the type of claim, PI claims can cost tens or hundreds of thousands of pounds, so professional indemnity cover means you would be protected in this eventuality.

Is professional indemnity insurance a legal requirement?

There is no legislation for self-employed contractors to hold professional indemnity insurance. However, many clients, recruiters and agencies will insist that you hold a certain level of business liability insurance. This will typically consist of professional indemnity, public liability, and employers’ liability – but there could be other cover requirements as well.

If PI insurance is stipulated in your contract and you do not hold it, this would put you in breach of your contract. You should check your contract for the requirements and any minimum level of cover that you may be required to hold. In addition, if you are a member of any professional bodies, they may stipulate that you hold professional indemnity insurance to a minimum level.

Does PI insurance provide cover for previous work as a contractor?

This would depend on the details of your insurance policy. Some insurers will offer professional indemnity cover on a ‘claims made basis’, whilst with others, you may hear the term ‘retroactive cover’.

What is claims made basis for professional indemnity insurance?

If your professional indemnity cover is on a claims made basis, this means that for the cover to protect you, it must be in place at the time a claim is made and reported. A professional indemnity claim can take months or even years to be made, so you could be left unprotected if a policy is not in place when a claim is made.

What is retroactive cover for PI insurance?

Retroactive cover provides professional indemnity cover for previous work that you have carried out. You can find out more about retroactive cover here. Some insurance providers, including Kingsbridge, will provide unlimited retroactive cover for professional indemnity free of charge, whilst others may give you the option to include it for an additional premium. Some providers may also require you to provide evidence of previously held PI cover.

What level of PI cover do I need as a contractor?

Ultimately, this will be up to you to decide what level of cover you think is suitable for you and the industry you work in. As standard with Kingsbridge’s insurance package, we offer £1 million for professional indemnity cover, but you can set your own levels of cover if you get a quote from us.

What is the excess for professional indemnity insurance?

The excess for your professional indemnity policy will depend on the level set by your insurer. Excesses can run into the thousands, so it’s always worth making sure that you would be able to pay the excess in the event of a claim. At Kingsbridge, we offer nil excess on professional indemnity claims on most policies.

How much does professional indemnity cost?

Just like the excess, the price of professional indemnity insurance will depend on your insurer. It will also typically factor in rating costs, such as your industry and occupation, and the level of cover that you require. Kingsbridge offers a package policy, which includes other often required covers of public liability and employers’ liability. This means you can get everything you need in one place and at a competitive price.

For more information, you can call our friendly, expert team on 01242 808 740, or if you’re ready to get a quote and purchase, you can simply buy online.


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