As you set up as a contractor, you’ll hear recommendations from various quarters about purchasing professional indemnity insurance. If you’re not sure what that it is, you’re in the right place. We’ve put together details of what the insurance entails and why you need it as a contractor – and believe us, you really do need it.
What is Professional Indemnity Insurance?
PI is a type of insurance which will protect you from any claims made against you due to mistakes, errors, libel, loss of data or the leaking of confidential information. For example, if an IT contractor was to install a piece of software which causes a machine to malfunction, their client may seek damages. Professional indemnity insurance protects the IT contractor from having to pay out, as the policy covers the damage. In short, it’s a fantastic safety net against mistakes. But why is it so urgent for contractors to have this kind of insurance?
Many Contracts Rely On It
When undertaking contractual work, more often than not you’ll be required to have a professional indemnity insurance policy taken out to cover the work. Sometimes, specific coverage is required and that coverage can be adapted should the work change. Without this insurance, businesses may be discouraged from hiring you in case there’s a mistake that would end up costing them more than it otherwise would. And as for you, you’ll quickly find that there aren’t many contracts for you to undertake without the proper policy in place.
Mistakes Will Happen
Regardless of how skilled you are, you’re still only human – as is every other contractor in the land. But mistakes can be very costly, and so it’s best to have PI insurance in place to soften the blow should any error be taken further. We particularly recommend this for IT contractors as you’re working with delicate technology.
You’ll Be Back Out of Business
Nothing would bring your crashing back down from the dream of going solo faster than a lawsuit – especially when you’d have to foot the bill for legal costs on top of compensation. Some claims (depending on the nature and size of the client) can reach staggeringly high amounts, and often see a contractor bankrupted almost instantly – and that’s before the legal fees!
Gorilla Accounting has partnered with Watson Laurie Insurance Broker to recommend and provide insurance products to our clients. Get in touch to find out what they could do for you, and to talk to one of our contractor specialists.