When working as an IT contractor, having the right insurance to cover your business is a must. However, as a service provider offering advice as your product, the information on what type of insurance to get can seem complicated. Especially professional indemnity insurance is something that people may find confusing. In this article, we’ll go over how IT contractor professional indemnity insurance works.

What is professional indemnity insurance?

As is the case with any business, offering professional services comes with its own risks. Professional indemnity (PI) insurance protects your business in case a client raises claims of professional misconduct, such as faulty advice.

Professional indemnity is ideal for businesses that provide a service where inaccurate or inadequate advice could result in personal damage or financial loss. In the case of an IT contractor, PI covers the IT consultant whose advice or design the customers rely on.

Professional indemnity insurance covers your business and employees in case of…

• Breach of professional duty – an act, error or omission that lead to negligence
• Dishonesty or fraud by your staff
• Losing client documentation
• Third-party defamation, libel or slander
• Legal liability for damages and claimants’ costs or expenses arising from the act, error or omission of the “Company’s” employees
• Inaccurate or inadequate advice provided to a client
• Acting without proper client instructions, failure to comply with the client’s instructions
• Breaches of statute
• Breaches of the Trade Practices Act

How is it different from public liability and products liability insurance?

Most business owners are familiar with products liability and public liability (PL) insurances. Products liability and public liability insurance are available to most professionals.

These two mainly offer coverage for property damage or personal injury that may occur during a service provider’s activities. To put it simply, they focus on the physical outcomes of faulty services.

IT Contractor Professional Indemnity Insurance – how does it work?

So, how does IT contractor professional indemnity insurance work? IT consultants are typically contracted by a third party to provide a range of services. This could include maintenance and repair, IT systems analysis, database programming and applications, as well as many other activities.

The difficulty with IT contractors is this range of services they may or may not offer. For example, if providing software design, the work could be seen as both a product and a service. On one hand, if the work is treated as a service, it’s covered under PI insurance. On the other hand, if it’s treated as a product, it would be covered under public or products liability.

Due to this variety of work and how it can be perceived, IT contractors will often need both professional indemnity and public liability insurance.

Do I need professional indemnity insurance as an IT contractor?

To make it simple – if you offer advice to clients against a fee on a service-basis, you may need professional indemnity insurance. However, as is always the case with insurance, the ideal solution will depend on your individual circumstances.

Norton & Co can help you sort out the best professional indemnity insurance arrangement for you. Speak with us today to find out more.

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