Pi Insurance In Practise
It is all well and good having someone tell you how worthwhile or how beneficial something is
, but without actually knowing what something does in practice, these words often fall on deaf ears. When looking at insurance, and in our case contractor PI insurance, the best way in which I can describe why having the policy is so valuable is to give you examples of it in action with real life situations. (Hypothetically of course)
Before I begin, I'll give you a quick recap over contractors, and of course PI insurance as a policy. Contractors need PI insurance to gain professional indemnity, the policy being protection against any negligence claims arising from professional error or misconduct that have resulted in financial loss to the end client. Claims against contractors do occur, and when they do, can sometimes be up to millions of pounds worth of damages, which is a huge amount to be held liable for (even if you are Simon Cowell). Professional negligence can occur at any time within the workplace, and for contractors who are 100 percent liable for their limited companies; millions of pounds worth of damages would be financially devastating.
Let's take a look at a hypothetical example, take Simon, an IT contractor. (This is in no way, shape or form meant to be Simon Cowell, although they do share similar tastes in black t-shirts and belts worn around the midriff.) Simon is an IT contractor working for a bank on a 6 month contract. His jobs are to co-ordinate and compile customer data given to him via masses of spread sheets and files, in order for the bank he is working for to have an easier format of customer statistics. Simon is nearing the end of his contract and has almost finished amassing and filing a database of around one thousand clients. Unfortunately however, Simon has recently been staying up late, and his tiredness is kicking in. Thinking he had backed up this huge amount of data, Simon decides to restart the current system that he is working on to then re-programme the existing customer data to make his end job easier. Unwittingly, by doing this, Simon totally deletes all of the information that he gathered and also all of the existing information that the bank took years in accumulating. As a result of Simon's professional negligence here, the bank then files a liability claim against him, claiming 2 million pounds as a result of his actions.
This is where the PI Insurance would kick in, acting as a financial safety net that protects Simon's assets and costs during this process. Because of the insurance that Simon took out, the PI cover has taken care of all costs and time that he would otherwise be liable for. As you can see from this fictitious example, PI insurance is a highly effective insurance policy that can cover a contractor for up to millions of pounds. This peace of mind is essential to any contractor working within IT, as much as other more typically high risk trades.
by: Chris Carvill
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