Follow Skillbase Consulting on Twitter Follow SCMS on Linkedin RSS

Corporate Management Solutions for Contract, Freelance and Contingency Workers RPO & CMO Solutions

What is professional indemnity insurance?

Professional indemnity insurance covers contractors, consultants and other external advisers in case they cause the company they are working for losses. It is often referred to as professional liability insurance or PI insurance, and is a must have if you regularly provide businesses with advice or other services.

Your Agency or service Provider must ensure all contingency workers have this and they must also provide blanket Insurance in case of an out of date policy.

What is professional indemnity insurance

Essentially, indemnity insurance is an insurance product designed for professionals and firms which covers them in case certain errors are made when providing services to other businesses. Policies cover such things as professional negligence, errors or omissions, breaches of professional duty or conduct and civil liabilities.

Professional indemnity insurance stems from the 1700s, where people who worked with companies, such as accountants, had unlimited liability if they caused the company to lose money. This means they were liable for their mistakes up to the value of all their assets, so they could lose all their belongings if the mistake was big enough. As a result, professional indemnity insurance was created to protect against this kind of loss.

As the reliance of companies on external professionals has increased in modern times, so has the reliance of professionals on indemnity insurance. Some contracts and industry regulators require professionals to have indemnity insurance, but it is a good idea to have if you want to protect against financial loss.

Why would I need Indemnity Insurance?

There are plenty of reasons which require you to have indemnity insurance, including, but not limited to:

  • You provide advice or professional services to your clients (including consulting or contracting)
  • You provide designs to your clients (such as working as an architect or design engineer)
  • You want to protect against allegations of mistakes or negligence in work you have undertaken for your client
  • You work as a contractor, consultant, freelancer or self-employed professional, and your client has requested you arrange professional indemnity insurance to undertake a contract
  • Your industry association/regulatory body requires you to have it

What jobs require Indemnity insurance?

A variety of jobs across a spectrum of industries would require you to have indemnity insurance. If you provide services to a company, you probably need indemnity insurance.

Below we have listed some (but not all) services which would require indemnity insurance:

  • Management and business consultants such as marketing consultants, training consultants and education consultants
  • IT professionals including IT contractors, consultants, programmers and developers
  • Technical and Engineering contractors including CAD designers, project engineers and offshore oil and gas engineers
  • Recruitment agencies and recruitment consultants
  • Designers such as web designers, graphic designers and interior designers
  • Fitness professionals including personal trainers, dance teachers and yoga instructors
  • Teachers and tutors including private tutors

What is the benefit to the end client?

As the end client, you may question the benefits to you of your contractor having indemnity insurance, but there are plenty. You need contractors to have indemnity insurance as if they are able in their role to cause your company to lose money, you need to make sure they (or the insurer) can pay for your damages. An individual is unlikely to be able to be able to afford the costs incurred by the company, and you need to make sure you get your money back.

If you would like to use the services of a professional you know has indemnity insurance and is fully compliant, or if you are a professional and need indemnity insurance but would prefer to outsource that detail, get in contact with Skillbase Contractor Management Services on 01322 310 33, or email us at