Professional indemnity for consultants and contractors

For most independent consultants and contractors, professional indemnity isn’t bought because of a considered risk assessment — it’s bought because a client or agency won’t release the contract without a certificate. That’s a reasonable trigger, but it’s worth understanding what you’re actually buying, because the version that merely satisfies the paperwork isn’t always the version that protects you.

Why clients insist on it

When a company engages an external specialist, it takes on a risk it can’t manage directly: your work becomes part of their operation, and if it’s wrong, they carry the loss. PI transfers that risk to an insurer with the means to pay. Larger organisations also have procurement policies and their own insurance obligations that require every supplier to hold minimum cover — there’s rarely any discretion for the manager hiring you.

Recruitment agencies and umbrella companies apply the same logic. Most will not put you on a client site without evidence of PI, public liability and, if you have employees, employers’ liability.

Typical contract requirements

The most common specification for UK consultants and contractors is £1m professional indemnity, though £2m is increasingly standard for corporate and public-sector work, and £5m appears on major construction, engineering and financial engagements. Contracts often also require the cover to be maintained for a period after completion — commonly six years, occasionally twelve on deed-executed construction contracts. That post-completion obligation is a run-off requirement in all but name, and it survives the end of the engagement.

Read the insurance clause carefully for three things: the limit, whether it must be “any one claim” rather than aggregate, and how long you must maintain it after the work ends. Agreeing to a twelve-year maintenance obligation is a long commitment that most contractors sign without noticing.

The IR35 angle

Holding your own professional indemnity cover is one of the practical indicators that you operate as a genuine business rather than a disguised employee. It sits alongside providing your own equipment, having a right of substitution, carrying financial risk, and correcting defective work at your own cost. It is not decisive on its own — HMRC looks at the whole picture, and status is determined by the reality of the working arrangement — but a contractor who carries their own insurance and accepts liability for their work presents a materially stronger position than one who doesn’t.

Related and worth knowing: many PI policies include cover for the costs of defending an HMRC status enquiry only if specifically added. If IR35 is a live concern for you, ask about tax investigation cover separately rather than assuming PI includes it.

Getting the activity definition right

This is where contractors most often go wrong. PI responds to claims arising from the activities described in your policy schedule. Describe yourself as “IT consultant” when half your work is project management and software development, and a claim arising from the development work may fall outside the definition.

Be specific and comprehensive. List everything you do: strategy advice, implementation, training, documentation, interim management, code, design. It rarely increases the premium meaningfully; omitting it can void a claim entirely.

What it costs and how fast you can get it

An independent consultant on a £1m limit with straightforward advisory work typically pays in the region of £20.00 to £60.00 per month, with higher-risk disciplines — engineering, financial, construction-related — costing considerably more. Cover can usually be arranged within a working day, and a certificate issued the same day, which matters when a start date is waiting on it. All figures are indicative and subject to underwriting.

Don’t stop at PI

Most contracts require public liability too — commonly £2m to £10m — because you’ll be physically present at client sites. If you handle client data, cyber cover is increasingly requested and genuinely useful. And if you take on any help, employers’ liability becomes a legal requirement immediately.

Premier Insurance has arranged cover for independent consultants and contractors since 1983. Send us the insurance clause from your contract and we’ll come back with cover that satisfies it — usually the same working day, with the certificate your client is waiting for.

Related professional-indemnity insurance guides

• How much does professional indemnity insurance cost in the UK?
• What limit of indemnity do I actually need?
• Professional indemnity vs public liability: what's the difference?
• Retroactive dates and claims-made cover explained
• Do I need run-off cover when I close or sell my business?

Speak to a UK insurance broker

Premier Insurance has been arranging UK professional-indemnity insurance since 1983. We are FCA regulated, BIBA members, and place cover with 200+ insurers including Lloyd's of London. Call 020 8908 2426, WhatsApp 07728 305383, or email hello@premier-insurance.co.uk. See our professional-indemnity Insurance page for full cover details.