If you are a contractor it is important to protect yourself by taking out good PI Insurance. This type of policy is considered essential to contractors and is very affordable for the cover it provides. If a client is dissatisfied and makes a claim against a contractor, it has the potential of financially costing them very dearly. If during a contract, a contractor either accidentally breached their duty of care, or unintentionally infringed someone else's copyright, or was dishonest or lost important data or documents, a dispute with their client can arise. This Insurance will cover the cost of damages and for fixing mistakes, as well as covering the cost of legal fees. It is one of the most important insurance policies to have in place as a contractor.
Technically speaking, PI Insurance will protect a contractor against the cost of defending claims where it is alleged that a client has suffered financial loss as a result of their contractor's error, omission or negligence. Basically, the cover acts as a safety net for the contractor, covering the costs and troubles of a potential claim made against them as a policy holder created as a result of any mistakes that they may have made within the workplace. This is deemed to be an essential policy for contractors as contracting can be regarded as a high risk occupation, leading to increasing possibilities for professional error. As well as providing obvious protection, this type of insurance policy is commonly a contractual requirement on most contracts, therefore an essential policy to be purchased. It basically protects a contractor's professional indemnity, giving a freelancer not only great and vital protection, but also peace of mind in such a stressful and sometimes pressurizing line of work.
As well as obviously protecting a contractor's professional indemnity, PI insurance also looks positive in the eyes of the HMRC with regard to contracts and IR35 status. This is one of the huge benefits that the insurance cover delivers as IR35 can be devastating to contractors who fall under the legislation. In this case taking out the policy acts as a means to bolster a contractor's position as a limited company, therefore aiding their viewpoint from the HMRC.
PI Insurance is a form of contractor cover that should never be overlooked. No matter what professional field a contractor works in, claims of negligence can be made against them, making the need for a PI policy adamant. Insurance is important is all forms of business, and for high risk professions such as contracting, a policy such as PI insurance is necessary in order to provide complete peace of mind.
Contractors receive high earnings for their specialized lines of work, but their self-employed status leaves them potentially vulnerable to claims and assertions. These possible claims against a contractor can be very costly and often devastating to their professional reputation. PI Insurance is a contractor's lifeline in these cases, as it covers all expenses and efforts during a claim as well as taking the burden of any troubles and costs along the way.
Chris Carvill works for QDOS, a provider of PI Insurance and IR35 Insurance. To see how the IR35 Rules may affect you see the QDOS website.