What Sort of Insurance Does an IT Contractor Need?
It is often the case that IT contractors who are about to move over from regular employment to contracting see only the positives of the move - better pay, more freedom, being your own boss - without thinking about the negatives that come with the change of career style. And one of the negatives of switching over to the contracting sector is that as your own boss you also quickly realise that the buck stops with you when it comes to admin, paperwork, taxes and insurance - not to mention when things go wrong. If that rainy day ever comes along and something does go wrong, it is you that has to deal with all the stress as well as face any costs or damages that might come your way. It is for this reason that IT contractors should ensure that they cover themselves for every eventuality that could go wrong and the best way to do this is by making sure that you have all the correct insurances in place. Not only will this offer peace of mind that your business will be protected if things go wrong, it also shows your clients and customers that you are a competent, professional and responsible business. Indeed many clients will not work with IT contractors who do not have certain kinds of insurance in place so it pays dividends not just in protecting your business but also in winning you business too. This article will offer a brief overview of the types of insurance IT contractors should consider:
(a) Public Liability Insurance - This is an insurance that is not specifically related to IT contractors, rather to contractors, freelancers and small business owners (as well as larger businesses) as a whole. PL Insurance is considered crucial if your business will be engaged in any sort of interaction with the public at large, either through them coming to visit your working premises or through someone being injured (or property being injured) as a result of you conducting your business. Should any of these eventualities happen, you and your business could face large claims for compensation if you are adjudged to be responsible for the injury. If you get coverage from PL Insurance then you will be fully covered against any injury to third parties or third party property whether on your business premises or when you visit the premises of other people. This is essential. Even if you don't actually injure someone it is possible to face spurious claims and the legal costs of these alone could break most businesses. PL insurance removes any worries about this kind of thing happening.
(b) Professional Indemnity Insurance for IT Contractors - A number of industries require that people working in their industry - particularly contractors and freelancers - have their own Professional Indemnity insurance. PI insurance is a form of liability insurance that offers protection for contractors who offer clients a service or professional advice. In the event that the service offered is not considered good enough or the advice offered is considered to be wrong it is possible that companies would sue the contractor for negligence and / or damages and PI Insurance protects the contractor if this happens. IT is an area in which this kind of claim is happening with more and more regularity and consequently IT PI Insurance is considered a must. Should a client bring claims against you for work you have done for them, IT PI Insurance will likely save your business.
IT Professional Indemnity Insurance is necessary if your contracting business sees you:
- Providing an advisory service of some kind to your clients.
- Handling any kind of data belonging to your client
- Taking responsibility for any of your client’s intellectual property
- Offering any kind of professional service in which you could be challenged about the standards of your work.
IT Professional Indemnity Insurance should cover you for the following:
Negligence - If you are offering any kind of advice or consultancy service as part of your contracting then you are vulnerable to clients making claims of negligence against you. Whether or not they are spurious and whether or not the client wins the case against you, you will be covered and protected financially.
Losing Professional Documents or Data - Should you cause the loss of data or documents belonging to your client by accident, you will be covered for any claims of compensation.
Software - IT contractors are covered for negligence and loss or damage when it comes to software too, either in terms of software they have installed or software they are working on for their clients. Software can be seen as either a service or ‘goods’ that the contractor is supplying.
Intellectual Property Infringement - As IT contractors will well know trademark and copyright issues around software can be extremely complex. Good IT PI Insurance will cover you in this area.
The Supply of Deliverables - Covers you if a customer or client decides to challenge you over the delivery of either hardware or software.
There are other insurances that a contractor might need to consider; Employer Liability Insurance is a must (and required by law - see here https://www.hse.gov.uk/pubns/hse40.pdf for more information) if you are taking on staff at any point and Office Insurance makes sense if you have an office and lots of expensive computer equipment. However, it is Professional Indemnity Insurance that should be first on your list, followed by Public Liability Insurance. You never know when you will need them, but when you do they will save your business.