Tech Talenta / People Power

Professional Insurance
As an IT professional who has opted to be a contractor you are very savvy in landing assignments and delivering to high pressure deadlines. You also have an entrepreneurial bent that helps you make giant strides in uncharted realms – be it technology or business applications. While nurturing the risk-taker in you all the time you also need to summon the risk-mitigator in you to ensure that an event outside your control does not tip your business over the financial precipice.

If you are an IT contractor you need to be consciously aware of the different sets of risks which require an insurance cover. Make sure your selected insurance products comply with obligations that govern your contract with the end client directly or through intermediary service providers. This article aims to present an overview and understanding of the personal insurance requirements that could be useful to you.
If you are contracting through an umbrella company or a recruitment agency do check if they have these covers taken on your behalf.

The three commonly known and useful insurances:

1 Professional Indemnity Cover:

During the course of your work you may be seen as an ‘expert’ and could be liable for compensation claims on account of mistakes or negligence in work. The mistakes could include negligence, unintentional infringement of intellectual property rights or loss of data.
Professional Indemnity covers could:
• Help the contractor defend against dispute brought by a dissatisfied client
• In the event of loss, provide a cover for damages
• Help cover the cost of fixing a mistake which might prevent a larger claim being brought.

The right amount of cover would depend on the nature of your work, risk perception and client expectations. This cover can range from £ 100,000 to over £1 million. It is better not to be very conservative in assessment of this risk as the overall loss could be high if several mistakes happen at the same time.

2. Employers Liability Insurance:

This insurance covers a contractor’s business if an employee sustains injuries while providing services or if there is a loss on account of employee’s illness. This cover is necessary for the following reasons:
• There could be a substitution clause in the end-client’s contract for your services. Not having the Employer’s liability cover could be construed as a breach.
• It is a criminal offence for an employer not to have this cover; Exemptions exist – for example if you are the only employee of the company with more than 50% stake. However, there are other considerations listed below that should make you think seriously about having this cover.
• If your spouse or partner is a director they are classed as an employee and the above exemption would not apply.
• Your firm may hire temporary helpers at which time this cover becomes essential. The legal minimum level of cover is £ 5 million.

3. Public Liability:

This covers any claims brought by third parties or members of public against your business. Common examples of such claims are damage to Client’s equipment while you are onsite or injuries sustained by a visitor to your premises. Employer’s liability will cover only claims brought by employees and hence public liability is necessary.

4. Certain other useful insurances to consider:
Depending on the scale and complexity of your services and your risk perceptions you could find the following insurances useful as well:
• Legal expenses cover: To cover legal costs if a client takes you to court; This could also cover your costs on account of Inland Revenue investigations, VAT disputes, IR 35 investigations etc.
• Personal accident, sickness , Travel
• Permanent Health Insurance
• Laptop/ Computer Insurance
• Business Interruption : Should business be interrupted due to floods, fire or accidental damage
• Offshore insurance: To cover Employer liability, PI and Public liability to cover offshore activities

Finally, please take professional and legal advice when you wish to pursue matters related to your insurance claims.

Jack Benny’s (American Entertainer 1894 – 1974) quotes:

“I don’t want to tell you how much insurance I carry with the Insurance company, but all I can say is: when I go, they go too.”

Some useful links:

http://www.contractoruk.com/insurance/contractor_insurance_guide.html

http://www.bytestart.co.uk/content/contractors/contractor-guides/it-contractor-insurance-p.shtml

http://www.contracteye.co.uk/income_protection_it_contractors.shtml

http://www.ir35calc.co.uk/contractor_insurance.aspx

http://www.cwjobs.co.uk/Content/ContractInsurance.html