Professional indemnity cover levels?

[Old Greg]

Put him on ignore mate. The forum starts to become useful when you do.

There are several ways to access FAQ's (some of them award winning) in addition to enjoying the friendly cut and thrust of the forum.

[Wanderer]

I have recently secured a contract and have been advised that I need to take out professional indemnity cover. I have asked my agent what level of cover I need (e.g. £1million, £2million) but they said this was my decision.

Get the minimum you can get away with because it's money down the drain. I'd have none at all if I wasn't required to have it. Do a search and you will find the names of the popular PI providers and see what levels they are offering.

[SueEllen]

£1m is very much the norm in the IT contracting industry.

Really?

Odd that I've had plenty of contracts where they stated the amount due back in the case of a claim would either be the amount they paid out or I needed £250K of PI.

To be honest you should if this is your first contract:
1. Gage how long the contract is going to be which you should have done when you met the client,
2. Get the minimum amount of cover you can get away with.

With future contracts you may need to increase the amount. The problem is once you have you need to stick with this cover in case problems are uncovered once you have left the contract.

[DaveB]

Get it and forget it. It's a cost of doing business and a pointer to your IR35 status. Not having business insurance when you claim to be operating as a business is not going to do you any favours should Hector come calling.

[Qdos Contractor]

Really?

Yes. I would say 19 out of 20 IT contractors who come to us for PI ask for £1m. Obviously there are exceptions, but I would definitely say £1m is standard.

[SueEllen]

Yes. I would say 19 out of 20 IT contractors who come to us for PI ask for £1m. Obviously there are exceptions, but I would definitely say £1m is standard.

Probably because those who need less don't take it out or they go elsewhere.

I actually have met IT contractors who don't take out PI insurance even though it states they need it in their contract. The contractors I've met in other professions take PI more seriously.

[northernladuk]

Yes. I would say 19 out of 20 IT contractors who come to us for PI ask for £1m. Obviously there are exceptions, but I would definitely say £1m is standard.

But you see this is what makes the whole thing a bit lfunny. Take a random snapshot of those 19 people, you will have everything from DBA's working on live corporate critical data to a service manager pushing pens and drawing diagrams. The fact that everyone in that snapshot need or want £1mil equally shows it isn't really risk based so kinda means we are just buying it like sheep with no basis. Don't get me wrong, I have mine and am happy to do so but what other contract/insurance on earth is so broadbased and not influenced by risk etc.

[northernladuk]

Probably because those who need less don't take it out or they go elsewhere.

I actually have met IT contractors who don't take out PI insurance even though it states they need it in their contract. The contractors I've met in other professions take PI more seriously.

And I have had the same experience but how seriously does it need to be taken I wonder? How many times have these ever been called on and paid out? I agree as I said having it so cheap it isn't worth not having it but how much of a risk are people that don't have it actually facing? Must be miniscule.

[Qdos Contractor]

But you see this is what makes the whole thing a bit lfunny. Take a random snapshot of those 19 people, you will have everything from DBA's working on live corporate critical data to a service manager pushing pens and drawing diagrams. The fact that everyone in that snapshot need or want £1mil equally shows it isn't really risk based so kinda means we are just buying it like sheep with no basis. Don't get me wrong, I have mine and am happy to do so but what other contract/insurance on earth is so broadbased and not influenced by risk etc.

I agree completely - it's obviously based predominantly on what the agency/end client asks for, rather than a realistic calculation of potential liabilities. That's just the nature of the industry, and that's what we've based our policies on.

[Qdos Contractor]

Probably because those who need less don't take it out or they go elsewhere.

Probably.