Guide to insurance for IT Contractors and IT consultants

As a contractor in the world of information technology (IT), the complex and intricate work you undertake is different to most other professions. With this in mind, your business insurance needs to be able to meet those complexities in terms of its coverage and protection.

The IT sector is open to misinterpretation and many people don’t understand the nature of the work of IT professionals. Nor do many people understand how long even the simplest sounding of tasks can take to implement and test.

This misunderstanding can lead to unnecessary pressures, potential errors and missed deadline, and even possible claims for alleged negligence.

With more IT professionals choosing to work as contractors rather than in long-term roles, it is important to remember to insure yourself against the unforeseen risks of your profession.

We look at which insurance will protect you, the IT professional, should there be a claim made against you, even if you feel you’ve done nothing wrong.

Business insurance for IT contractors and IT professionals:

Professional Indemnity insurance (PI)

Professional Indemnity insurance (PI) covers claims made by clients for professional negligence or mistakes, whereas public liability insurance cover claims made by members of the public for injury or damage.

How do IT contractors benefit from Professional Indemnity insurance?

The risks to IT contractors are not always obvious and easy to rectify. Errors in code resulting in projects not being delivered on time and to budget have resulted in many claims against IT contractors that have cost thousands of pounds.

Better chance of winning contracts – Clients are highly unlikely to grant you a contract if you are not carrying professional indemnity insurance. Holding a professional indemnity insurance policy will give you peace of mind that you are covered, as many employment agencies will only find you your next contract if you hold professional indemnity insurance.

Prevent financial stress – Claims can cost anything from a few hundred pounds to many thousands. If you are insured your legal fees and compensation awards will be covered, if not you will be liable for the costs out of your own pocket.

Prepare for human error – Mistakes can occur even by the most diligent of people. It only takes one mistake to trigger a claim. For peace of mind, it is important to not only protect yourself from potential negligence claims (professional indemnity insurance), but also from claims such as injury or damage to third parties (public liability insurance).

Protect yourself against the unforeseen – What would you do if you were to lose your laptop, or if it was stolen? Not only could this cause a time delay to your clients’ work, but if you were storing sensitive client data on your laptop, then they could pursue a claim against you for negligence. PI will provide protection in the event of a claim and help get you back on track.

Click here for a quote for your contractor professional indemnity insurance

Public Liability insurance

Public Liability insurance covers claims of injury or property damage by a member of the public against your business. This could include customers, clients, suppliers or passers-by. The policy can also cover the cost of your legal defence, compensation payments, medical costs and loss of income as a result of the claim and is offered as part of our Business Combined insurance policy.

How can IT contractors benefit from Public Liability insurance?

Protect against accidents – It only takes one mistake to cause an accident and trigger a claim. Therefore, it is important to protect yourself from potential claims such as injury or damage to third parties, such as colleagues and other members of the public (public liability insurance).

Portable Equipment insurance

If you’re self-employed and working as a freelance contractor, losing your portable equipment could cause your business to come to an abrupt stop. Portable Equipment insurance becomes even more important if you undertake location-based projects on a client’s premises or in a co-working space.

If you accidentally lose or damage your electronic equipment, or have it stolen, the policy can help get you back on track with the minimum of downtime and provide you with peace of mind that you can still meet your client deadlines.

The policy provides up to £5,000 of cover for devices including:

• • Laptops
  • Mobile phones
  • Video cameras and equipment

• Digital cameras
• Hardware and tools
• Projectors
• Printers

Portable Equipment insurance, starting at £1,000 of cover, is offered as part of our Business Combined insurance policy along with Employers’ Liability insurance, Public Liability insurance, general contents cover, and Directors and Officers insurance.

We think the policy represents real value for money considering the level of cover you benefit from.

Click here for a quote

Directors and Officers insurance (D&O)

If you’re self-employed as a limited company contractor there are many instances in which you can be held personally liable. If you have not been sticking to the rules, even if you were unaware you were doing wrong, action can be brought against you by a client, by HMRC or by a regulator for your industry.

D&O insurance is designed to provide protection for these types of claims and can cover legal fees and defence costs in case you breach a health and safety law, or a company rule, or if you are accused of financial mismanagement.

How can IT contractors benefit from Directors and Officers insurance?

Missed filing of limited company accounts – It can be all too easy to take on extra work to meet your personal financial needs, especially in a ‘feast for famine’ economic climate. If you take on too much work, it can be easy to lose track of your company admin which can result in missing important submission deadlines. If this occurs, you could be prosecuted under the Companies Act 2006 and forced to pay costs and legal fees. D&O insurance would respond to provide you with cover in an instance such as this.

Legal Expenses insurance (LEI)

Legal Expenses insurance offers cover for legal costs incurred in defending claims that aren’t covered by indemnity and liabilities policies. The policy can provide cover that is relevant to contractors, especially since IR35 was introduced to the private sector, including:

• Contract disputes
• IR35 investigations
• Tax & VAT HMRC Investigations
• Debt Recovery against agencies and clients
• Legal defence cover
• Property protection & bodily injury

The policy also provides added value via specialist helplines for:

• IR35 issues
• Tax advice
• Legal advice
• Business law
• Counselling

Personal Accident, Sickness & Travel insurance

As a self-employed IT contractor, you can benefit from this cover if you have an accident or suffer an illness that stops you from working and therefore limits your income.

Our innovative policy provides financial help should you suffer from an injury or illness and can incorporate cover for business and holiday travel worldwide in any one year for you and your family.

The Personal Accident and Sickness policy provides cover for one person only (you will be asked to provide details of the insured person). If you want cover for a second person a further application will need to be completed with their details.

However, please note that if you take the holiday travel extension out this automatically covers your spouse and dependent children for holiday travel.

Other business insurance policies that might be relevant to you include:

Employers’ Liability insurance (EL) – A legal requirement if you have employees. It covers you for injury and/or illness claims made by employees while working for you.

Office Contents insurance – If you have an office with business equipment it’s worth taking out office contents cover. Your household policy many not cover your business equipment (check your policy). this insurance will cover your office contents including computers and electronic office equipment, furniture, stationery and documents whilst within your property.

Cyber Liability insurance – Cyber insurance protects your business in the event of a malicious attack on your computer systems and data. If you store sensitive data about your clients or employees or even your network of contacts on your laptops, tablet and/or other internet connected devices, then cyber insurance is considered a vital cover for your business.

Download our handy contractor checklist pdf here 

Sources:

www.caunceohara.co.uk

https://quotes.caunceohara.co.uk

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Can contractors working on contracts inside IR35 still work through a limited company?

Contractors’ IR35 Guide