Professional indemnity cover is one of the big three insurance products – alongside public liability and employers’ liability – that most contractors in the UK will hold. Despite it being so commonplace, the team at Kingsbridge find that they regularly get asked (by new contractors and veterans alike) exactly why they need it and what the point of it actually is? We know you may well have questions about why your limited company contractor business needs professional indemnity insurance as well, so we’ve pulled together this overview complete with answers for the questions we get asked all the time.
Do I need professional indemnity cover as a contractor?
You’ll often find that client or recruiter contracts demand you hold a particular level of professional indemnity cover, sometimes known as PI insurance, along with the other two members of the big trio, public liability and employers’ liability. Unfortunately, this means some contractors regard professional indemnity as little more than a tick in a box – they hold it to the amount they need, but don’t actually care or know what they’re covered for. As you can imagine, this can see some contractors come unstuck should they one day need to make a claim. But don’t worry, we’re going to outline here what professional indemnity is and when you might need to call upon it.
What is professional indemnity cover?
Professional indemnity cover is there to protect you, the contractor, from claims against you relating to issues with the work you carry out for clients. This includes claims such as professional negligence, defamation and libel, loss of data and/or documents, or intellectual property breaches.
Should a client make a claim of this nature against you, your professional indemnity cover may assist in covering compensation you may have to pay, plus legal fees amassed defending the claim. This is why it’s vital to make sure you’re not under-insured in terms of professional indemnity: in many industries, professional indemnity claims can be in the tens or even hundreds of thousands of pounds, so you want to ensure you would be protected should a claim be made against you.
Is it a legal requirement for contractors to hold professional indemnity insurance?
It is not a legal stipulation that contractors must hold professional indemnity cover. Although, as mentioned, many clients and recruiters will specify it, as a contractual requirement, that you hold a particular level of professional indemnity cover; usually alongside public liability and employers’ liability. There may be other insurance requirements in your contract too.
If professional indemnity is a contractual obligation then not holding it would see you in breach of contract. For this reason, it’s important that you double check your contracts for any insurance requirements including the minimum level requested. It’s also worth checking the requirements of any professional bodies or organisations of which you’re a member as they may have similar requirements when it comes to minimum levels of insurance.
Does professional indemnity insure you for past as well as future contractor work?
Exactly what time periods you’re covered for would depend on the exact details of your professional indemnity insurance policy.
What does claims made basis mean with regard to professional indemnity insurance?
When professional indemnity cover is purchased on a claims made basis then it means the cover must be in place at the time a claim is made and reported (i.e. you must be actively paying your policy premiums in order to make a claim). Professional indemnity claims can be made months or even years after you worked on a contract, so you could be left without protection should your policy not be in place when a claim is made against you.
What is retroactive professional indemnity insurance?
Retroactive cover is when your professional indemnity policy covers you for work that you have previously carried out. Some insurers, including Kingsbridge, will automatically include unlimited retroactive professional indemnity cover at no additional charge, while others include it as an optional extra for an additional premium. You may need to provide confirmation that you have previously held professional indemnity cover in order to hold retroactive cover.
How much professional indemnity cover do contractors need?
This is a question our team is asked a lot but it is up to you to decide what you think is suitable based on a) the industry you work in, and b) any requirements in your contracts. At Kingsbridge, we offer £1 million professional indemnity cover as standard, but we allow our customers to set their own levels of cover in order that their policy is right for them and their work.
Does professional indemnity cover have an excess?
Your insurer will set the level of excess on your policy and this is where you need to watch out as excesses can be as high as the thousands with some providers. You need to be confident that you can pay the excess should a claim be made against you. However, some providers offer much smaller excesses. For instance, at Kingsbridge, our excess on professional indemnity claims (on most policies) is nil.
How much are the premiums for professional indemnity cover?
As with excess, the cost of your professional indemnity will depend on your insurance provider and will factor in details such as your occupation, your industry and your level of cover. The premiums, therefore, can vary sharply from provider to provider. Kingsbridge’s professional indemnity cover, as an example, is available as part of a package of contractor insurance that includes public liability, employers’ liability and more, so the premiums are for one comprehensive package rather than individual policies.
Please note: There is no obligation to go with Kingsbridge but they offer a fully comprehensive package of insurance.