Professional indemnity, decoded
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PI insurance covers claims that your professional work caused a client financial loss — negligent advice, deliverable errors, IP infringement. Almost every outside-IR35 contract will demand it before you start; the question is never "whether" but "how much".
Indemnity limits clients ask for
- £1m — standard for IT delivery roles, PMs, BAs
- £2m–£5m — FS programmes, architecture decisions, any data-heavy work
- Sometimes written as "the greater of £Xm or contract value ×2"
What it actually costs
A £1m PI policy for a single-director IT contractor typically runs a few hundred pounds a year; £2m adds modestly. Tech-focused insurers bundle PI with public liability (£1–5m) and employers' liability (legally required only once you hire). Bundling is almost always cheaper than separate policies.
Exclusions consultants miss
- Retroactive cover dates — set the retro date to your first ever contract, or earlier work is exposed
- Contractual liability beyond what law imposes (unlimited liability clauses)
- Claims notification "as soon as aware" — late notice voids; report incidents you think are nothing
Full cover stack and provider-neutral selection criteria in the contractor insurance guide.
Retroactive-date clauses deserve a second look too: cover that only responds to work performed after the policy started leaves your first contracts exposed when you switch insurers. Carry the original inception date forward.
Run-off cover: the exit nobody plans
PI claims can arrive years after you stop trading — a deliverable that fails in 2028 can generate a 2031 claim. Run-off cover (keeping PI alive after you wind the company up) is cheap relative to the exposure and worth twelve months minimum at wind-down. Client contracts increasingly specify a run-off requirement — check the clause before you dissolve anything. Combine this with the wind-down sequence in the company checklist: dissolve only after the run-off policy is in force, or you're personally exposed as a former director for anything the company missed.
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