What Types of Insurance Could an IT Contractor Need?
| Type of insurance | What it protects against | Is it legally required? |
|---|---|---|
| Professional indemnity | Claims relating to professional mistakes, negligence or financial loss | No, but clients may require it |
| Public liability | Injury to third parties or damage to their property | No, but clients may require it |
| Employers’ liability | Claims from employees who become ill or injured through their work | Required if you employ people |
| Cyber liability | Certain cyber incidents, such as data breaches or cyber attacks | No |
| Business equipment | Loss, theft or damage to business equipment | No |
| Personal accident and income protection | Your own financial position if you’re unable to work | No |
Do IT Contractors Need Professional Indemnity Insurance?
Professional Indemnity insurance is not a legal requirement; however, an IT contractor would certainly benefit from this type of cover.
Designed to protect businesses against claims for professional errors, negligence or failures in the services you provide, here are some examples of the type of situations it’s ideal for:
- A software development error causes financial loss.
- A technical recommendation is alleged to have caused loss to a client.
- A consultancy project doesn’t deliver the expected outcome.
Some clients may also have certain requirements for it.
‘For example, Joanne is a software development contractor who was asked to provide evidence of £1 million professional indemnity insurance before starting a new project.
Their previous policy didn’t meet the client’s requirements, so they had to arrange additional cover before they were able to start the contract’
Do IT Contractors Need Public Liability Insurance?
If you have members of the public visiting your site or employees visiting your client’s premises, then it may be worth having Public Liability Insurance.
It isn’t a legal requirement, but it may be required by a client.
It is certainly useful for protecting you and your company against any accidents that may occur on either your company’s grounds or a client’s site where your staff may be visiting.
Examples of why this might be useful for an IT contractor:
The nature of the appointment/meeting
- You accidentally damage equipment at a client’s premises.
- Someone trips over your equipment.
Do IT Contractors Need Employers’ Liability Insurance?
As stated on GOV.UK, it is a legal requirement to get Employers’ Liability insurance:
- As soon as you become an employer
- To cover you for at least £5 million
- From an authorised insurer
This type of insurance protects your business by helping to pay out compensation should an employee become ill or injured from carrying out duties in the workplace, for which you as the employer are responsible.
You can be fined £2,500 every day that you are not properly insured.
Do IT Contractors Need Cyber Liability Insurance?
As an IT contractor, cyber insurance is essential, providing cover for certain losses and liabilities resulting from cyber incidents.
This could include things like:
- Data breaches
- Cyber attacks
- Malware
- Business interruption caused by a cyber incident
Do IT Contractors Need Business Equipment Insurance?
An IT contractor can own a lot of expensive equipment, making this type of insurance a sensible choice of cover, especially if you’re working from different locations or carrying expensive equipment between home and client premises.
It may also protect against other risks, such as theft or accidental damage, depending on the policy.
Do IT Contractors Need Personal Accident and Income Protection?
This type of insurance slightly differs from the others discussed, as personal accident and income protection is more about protecting you personally if you are unable to work.
Personal accident only covers physical injuries resulting from an accident, while income protection covers both injuries from accidents and illnesses.
Personal accident cover will pay your business a weekly amount if an accident leaves you unable to work, and if you’re left with a permanent disability (or an incident results in death), your business could receive a lump sum payment.
Income protection insurance provides a tax-free monthly payout (typically around 50% to 65% of your gross earnings) if you are unable to work due to illness or injury.
What Insurance Do I Need if I Work From Home?
If you work from home, you might assume that your home insurance covers your business activities.
This is something you should check just in case – business.gov.uk specifically urges businesses to update their existing home and motor insurance policies to ensure they’re covered for business purposes.
IT Contractor Insurance Checklist
Before buying insurance, you should check the following:
- What is actually covered?
- What are the exclusions?
- Is the policy limit sufficient?
- Does it cover subcontractors? (if relevant to your situation)
- Is the insurer authorised? You can check this through the Financial Conduct Authority register. How Can an Accountant Help with Expenses?
We hope you found this page helpful. If you have any further questions, our team of experts are available to answer any queries, so give us a call on 01442 795 100, or email jaime.thorpe@dolanaccountancy.com. Alternatively, contact us via live chat.
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