Professional indemnity insurance for contractors is rarely bought because the contractor decided they needed it. It is bought because an agency or an end client put a figure in a contract and would not proceed without it. Understanding who is asking and why makes the purchase quick and stops a contractor buying the wrong limit on the wrong basis.
Who asks, and what they usually ask for
Recruitment agencies placing contractors, end clients contracting directly, and public sector frameworks. Most name three covers together: professional indemnity, public liability and employers liability, each at a stated minimum. The professional indemnity figure is usually the largest and is set by the client's own risk policy rather than by anything about your work.
Why the cover suits the work
A contractor sells expertise, and the loss a client suffers when that expertise is wrong is financial rather than physical. A misconfigured system, a design error, a report that led to a bad decision: none of those damages property and all of them cost money. That is precisely what professional indemnity answers for, and why public liability alone is never what an agency asks for.
Gaps between contracts, and why the policy should not lapse
Professional indemnity is written on a claims made basis, so the policy that answers is the one in force when the claim arrives, not the one that was in force during the engagement. A contractor who cancels between contracts leaves every piece of completed work uninsured. Keeping the policy running through a gap costs far less than the exposure it closes.
Limits, and what a client's figure really means
The figure in the contract is the minimum the client will accept, not an assessment of your risk. Check whether defence costs sit inside or outside it, because inside means every pound spent defending reduces what is left to settle. Check also whether the limit is per claim or in the aggregate for the year, since aggregate limits are common at the smaller end.
Questions people ask about professional indemnity insurance contractors
Do contractors legally need professional indemnity?
No statute requires it. Agencies, end clients and public sector frameworks require it by contract, which for a working contractor amounts to the same thing.
What limit do agencies usually ask for?
A stated minimum set by the client's risk policy rather than by your work. Check the contract before buying, and check whether defence costs sit inside the limit.
Should I keep the policy between contracts?
Yes. Cover is claims made, so cancelling leaves completed work uninsured. Continuous cover is the point of the product.
Does my limited company or I hold the policy?
The entity that contracts should be the insured, which for most contractors is the limited company. Say so when you buy, because the wrong named insured is a real problem at claim time.