Sun 20th Mar 2016
Professional indemnity insurance is one of the most important types of insurance for contractors or freelancers. Often you will find you are unable to commence an assignment until you have proof of adequate business insurance.
What is Professional Indemnity Insurance?
Professional indemnity insurance is designed to protect contractors against claims for negligence (such as making a mistake, or giving incorrect advice.) It also provides cover for loss of documents, loss of data, breaches of intellectual property, and defamation and libel.
Professional Indemnity Insurance covers you for as long as you make the payments, not for the period of time you did the work. Therefore you must consider how long you should maintain cover, to ensure any future issues can be covered.
Why do I need it?
Professional Indemnity Insurance covers you should you a mistake that you are responsible for. If your actions are deemed to be negligent, then insurance will protect you against any compensation claims charged against you as well as cover legal costs.
Claims against your business can run in to thousands of pounds, which can be difficult money to access at short notice.
If you are accused of negligent work, however you disagree, you can use your policy to help you to fight the accusation legal. Professional indemnity insurance provides you with the pea ce of mind that you will be able to afford to defend any claims if necessary.
Having Professional indemnity insurance is a good indicator for IR35 compliance. It shows HMRC that you have a legitimate business, taking responsibility for the risks of your actions, rather than transferring them to the contract owner.