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IT Contractor Insurance Professional Indemnity insurance, Public / Employers liability - Hiscox.

What insurance cover should IT contractors take out?

Published on Jun 24, 2009 |

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When starting a business, insurance is the one of the easiest things to forget - or at least to put aside until later.

The extra burden of cost an insurance policy puts on a business can be off-putting, and it can seem unnecessary in the early stages.

But IT contractors without insurance would almost certainly find it difficult to win contracts and when relying on yourself for your income there is just too much to lose not to be adequately covered.

You can compare insurance quotes right away via our partner, Simply Business.

Professional indemnity insurance

An important cover for IT professionals is professional indemnity insurance.

As your role is likely to involve giving advice to clients about their IT systems or working directly on those systems, you are at risk of making mistakes that could seriously damage your clients' business.

Professional indemnity covers you for financial claims made by clients in the event that you are negligent in your work or make mistakes.

Any large payouts you might have to make to clients could seriously cripple or even close down your business, not to mention the legal costs involved. Professional indemnity could cover these costs, ensuring your business doesn't lose out.

Public liability insurance

For the majority of small businesses, public liability insurance is the most important type of cover. Whenever a business involves contact with third parties, i.e. the general public, customers, suppliers etc, there is the possibility of an accident happening that may result in injury to that person or damage to their property.

For example, you may be working on a client site and have left some cabling loose on a walkway. If someone was to walk by and trip on that cable, seriously injuring themselves, you could end up facing a claim for compensation for their injuries.

Alternatively you could be setting up some computer equipment and leave some electrical connections loose in the process. If a spark was to cause a fire, you could be liable for the cost of damage to the building and any equipment within it.

Employers' liability insurance

If you run a consultancy firm and employ staff, even if it is on a part-time or temporary basis, you must take out Employers' Liability Insurance - it's the law. You legally need to have a minimum of £5m cover, but many insurers like companies to have £10m to be on the safe side.

Employers' liability insurance may seem like a nuisance and unnecessary extra expense but the law is there to protect your business and your employees.

If an employee is injured or becomes ill in the course of their work, and it can be proven as your fault, you could face a claim for compensation. This policy will ensure that your business is protected from this cost. Another good reason for making sure you comply with this law is that there is a £2,500 fine for each day you are in business without cover.

Other types of business insurance

Although these are the three main insurance covers to be aware of, business contents cover can also be invaluable as the nature of your work undoubtedly means that you keep a lot of computer equipment at your office, whether it is based at home or in other premises.

Additionally, if you take equipment and tools to client sites, you should take cover for mobile contents. Remember that if you do work from home your regular home contents insurance doesn't cover items used for your business.

You may also consider taking out tax investigation cover, often known in the contracting industry as IR35 insurance.

This seems like a lot of different insurance policies to undertake and one would assume that the cost for so many would be prohibitive. Many insurers, however, will include all of them under one policy and by doing so can cut the cost down. This also makes it easier when the time comes to renew.

More information

You can compare quotes for all types of insurance via our partner, Simply Business.

This article written by Rosie Beasley from Simply Business.