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Professional indemnity insurance for IT Consultants

Why is professional indemnity insurance essential for IT Consultants?

The IT profession has its own unique set of challenges and possible issues that could arise. For example, if for some reason a database were to become corrupted as a result of your negligence, this could lead to a project being delayed and a loss in revenue for your client. This could result in the client seeking damages to cover their lost profits.

This is where professional indemnity comes in. If your occupation or service provides advice to your clients, professional indemnity insurance is a must as it can help cover you for the costs of a negligence claim.

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If you are ready to speak with a consultant about different business insurance options available, simply enter your details in the form. Keep reading if you want to learn more about the different types of cover available.
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What exactly is professional indemnity insurance?

Professional indemnity insurance is designed for any professionals who provide advice or a service to their customers. It offers protection against claims of negligence made by a client against you. This type of cover will pay for the costs and expenses involved in your legal defence, as well as any damages or compensation you are required to pay.

If you make a mistake or an omission during the course of your work that causes loss or damage to a third party, the chances of legal action by those impacted is likely. Unfortunately, defending yourself against such claims can cost you a great deal of time and money, as well as end up causing significant damage to the reputation of your business.

This is why professional indemnity insurance is such a good idea. It covers for you and your business against professional conduct claims, ensuring your business and its reputation will be able to survive legal action. This guarantees peace of mind and confidence when you go about conducting your day-to-day business.

When should IT consultants take out professional indemnity insurance?

The best time to consider taking out professional indemnity insurance is when you first establish yourself as a consultant. Weighing up your insurance options is an important part of starting out any new business, so factor your professional indemnity needs into your calculations.

It’s also a good idea to reassess your level of risk whenever you take on a new client or a different style of work. For example, while you may at first decide the type of work you are performing is not likely to expose you to a legal claim, remember to take the time to assess this decision if your situation changes.

What are the common features of professional indemnity insurance policy?

Every professional indemnity policy features benefits and coverage for a range of events and circumstances. While cover can obviously differ from one policy to the next, most policies will generally cover:

  • Legal defence costs
  • Legal consultation costs
  • Civil liability as a result of your professional work, for example if you slander someone or infringe on someone else’s intellectual property rights
  • Compensation for attending court
  • Conflict management
  • Mediation and arbitration
  • The replacement and/or restoration of lost or damaged documents
  • Liability for employee fraud and dishonesty
  • The hiring of public relations consultants to help re-build the reputation of your business
  • Contractors
  • Training and development.

Seek advice from different insurance providers to work out exactly what each policy does and doesn’t cover.

What does professional indemnity insurance usually cover?

Indemnity insurance for IT professionals is designed to cover financial loss resulting from an act, error or omission by you or your company. This could mean negligent advice, a faulty design or failure to advise.

While the level and amount of cover available can differ from one policy to the next, professional indemnity policies will typically cover:

  • Acts of negligence while a service is being provided
  • Accidental infringements of intellectual property rights
  • Unintentional breaches of confidence or misuse of information
  • The loss of or damage to a client’s important documents
  • Accusations of libel or slander against you or your business
  • Dishonesty of employees

A professional indemnity policy should cover your business and any partner, director or employee of the business. However, remember that cover differs between policies, so compare your options and speak to an insurance consultant for expert advice tailored to your needs.

What are the usual conditions of professional indemnity insurance?

In some professions, clients may require you to take out professional indemnity cover before they will offer you any work. As well as IT professionals, other workers who can benefit from this type of cover include architects, financial advisers and medical professionals.

When it comes to setting up a policy, the requirements you will have to satisfy will vary from one insurance provider to the next. You may need to provide evidence of your work during the application process, such as your ABN and any licenses or qualifications you may hold. You can take out long-term cover to protect you across all of your work, or you can choose a more targeted policy to provide cover for a specific project you may be undertaking. If you’re looking to cover a specific project, you may need to provide further details about it, including information about any employees or contractors involved in the project.

It’s also important to note that a professional indemnity policy must usually be in force at the time a claim is made in order to guarantee protection. So, if you plan to stop coverage once you’ve finished a particular project, make sure your policy offers retroactive protection.

As is the case when buying any form of business insurance, seek expert advice to ensure you end up with the right amount of cover.

Find out more about Professional Indemnity

Comparing professional indemnity insurance for IT consultants

Although you may believe that it’s extremely unlikely any of your clients will make a claim against you, it can happen at any time—even years after you’ve finished the work in question. If you are made aware of a situation that may result in a claim being made against you, the first thing you should do is notify your insurer as soon as possible. If a letter or a phone call arrives from a client demanding that you pay compensation or threatening legal action, notify your insurance provider.

Not notifying your insurer can have a huge impact, including the possibility of giving your insurer the right to reject your claim once your policy has expired. Once notified, your insurance company can guide you through the best procedure to defend the claim, leaving you free to simply concentrate on the normal operation of your business.

How to choose a professional indemnity insurance policy as an IT consultant

There are a number of factors you should take into account when searching for professional indemnity insurance for IT professionals.

  • Check your current insurer. If you already hold one or more business policies with an insurance company, check to see if you would be entitled to a discount if you take out professional indemnity cover with the same company. Also remember that some insurers will offer discounts if you’re a member of certain trade organisations.
  • Look for specialist insurers.Some insurers specify in providing insurance cover for certain professions, so it might be a good idea to see if a company that specialises in insurance for IT professionals has a good policy for you. A specialist insurer can offer an in-depth knowledge of the common issues and pitfalls unique to your chosen industry.
  • Know what you’re looking for.Take the time to sit down and work out the risks posed to you and your business. This will help you find a policy that offers the right level of cover for you.
  • Obtain multiple quotes. Don’t simply apply for the first professional indemnity insurance policy you find. Instead, get multiple quotes from a number of insurers and compare them against one another.
  • Look past the cost. While cost is obviously a big factor in any business decision, don’t simply choose a professional indemnity policy based on the cost of premiums. Take the time to ready policy documents carefully and determine exactly what each policy does and doesn’t cover. This will help you determine the true value of each policy.
  • Do your research. Research multiple insurance companies and find one with a trusted and reliable reputation. Ask industry colleagues for their recommendations and advice on choosing the right insurer.

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Frequently asked questions about professional indemnity insurance

Q. What does a professional indemnity insurance policy cover?

  • A. Professional indemnity insurance protects you and your business against claims of negligence. If you provide advice or a service to your customers, this type of policy provides cover for the legal costs of defending any claim, as well as for any damages or compensation you are legally required to pay.

Q. What does an insurer mean when it says my professional indemnity policy is offered on a ‘claims made’ basis?

  • A. This means that, in order to be protected, your policy will need to be in effect when a claim is made against you. On the other hand, other forms of insurance provide cover if an event occurs during the period of insurance.

Q. Do I really need this type of cover?

  • A. Professional indemnity insurance is something every IT consultant should consider. This type of cover protects you against any uncertainty around claims. In addition, while you may think this sort of claim will never be made against you, all it takes is one angry client to possibly destroy the reputation and financial standing of your business.

Q. How do I compare professional indemnity policies?

  • A. Determine what risks your business is exposed to and how much cover you need. Research insurers, seek advice from industry colleagues, seek multiple quotes and use a site like to compare your options. If you need expert advice when shopping for cover, speak to an insurance consultant.

Professional indemnity insurance can help protect your business against any claims resulting from your negligence. It can cover your financial needs when such claims arise, as well as take the stress out of dealing with these sorts of legal situations. For IT consultants, this type of cover is something that should be closely considered.

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