IT contractor insurance

A safety net for modern contracting

Insurance for IT contractors protects you if something goes wrong with your work or business operations. It is designed for sole traders and limited company contractors who provide services, advice, or deliverables to clients. The core purpose is simple - cover the financial impact of allegations that your work caused a loss, as well as day-to-day risks like data breaches, equipment damage, or client injuries at your workspace.

Market conditions in the UK are shifting in your favour in some areas. Professional indemnity cover remains competitive, with broader terms and lower average rates compared with recent years. At the same time, cyber threats continue to rise, yet many small businesses still operate without dedicated cyber insurance. That gap creates exposure for contractors who handle client data, remote access, or cloud platforms.

Insurance can offer real financial protection, but only when you understand what’s covered - and where the gaps are.

Across the UK, a significant number of SMEs - including many contractors - still lack basic insurance. Underinsurance is common, and disputes are increasing around cyber and business interruption wording. This guide focuses on plain-English clarity so you can spot key protections, typical exclusions, and how claims usually work. We will also flag where costs are rising due to inflation and where you may find value from insurers adopting smarter technology.

The aim is not to sell you a policy. It is to help you decide, with confidence, what level of cover you need, how to compare options, and how to avoid surprises at claim time. If you only remember one idea, make it this: buy the cover that matches your real risks, not just the lowest premium.

What is covered in practice - and how it works

Professional indemnity usually sits at the heart of IT contractor insurance. It responds when a client alleges negligence, error, or breach of professional duty and claims financial loss. Typical examples include a deployment that corrupts data, a missed dependency that delays a product launch, or advice that leads to system downtime. Policies can fund legal defence, settlements, and compensation if you are liable. Claims are generally handled on a claims-made basis - the policy in force when the claim is made responds, not the policy active when the work was done.

Public liability protects against injury to third parties or damage to their property - for instance, a client trips over your kit at their office. Employers’ liability is a legal requirement if you employ staff in the UK, including some scenarios with labour-only contractors. Business equipment cover can insure laptops and peripherals at the office, home, or on the move. Cyber insurance addresses data breaches, ransomware, business interruption from cyber incidents, forensic costs, notification, and PR support. Some policies also include social engineering and cybercrime, though limits and conditions vary.

There are limits. Contractual penalties, known loss events, deliberate acts, and warranty breaches are often excluded. Many policies require you to meet reasonable security standards - for example, MFA on remote access, patching, and secure backups - before they will respond to a cyber claim. Business interruption may be limited by defined triggers and waiting periods. Always check retroactive dates on professional indemnity and the definition of your professional services to avoid gaps.

In a claim, insurers will ask for contracts, statements of work, change logs, emails, and incident evidence. Keeping clean documentation and a defined incident response plan can speed things up and help achieve a fair outcome.

Who benefits most

This insurance suits UK-based IT contractors who provide advisory or delivery services - for example software engineers, DevOps specialists, cloud architects, data scientists, cybersecurity consultants, product managers, and project leads. It is especially relevant for roles with access to client systems, sensitive data, or decision-making influence.

If you work via a personal service company, your client contracts may require specific limits for professional indemnity and public liability. Given rising contractor demand and IR35 complexity, many end clients expect proof of cover before onboarding. Contractors operating in high-availability environments or regulated sectors will usually need broader limits and clearer wordings.

It may be less critical if you undertake low-risk, non-advisory tasks, never access live data, and your client assumes responsibility for final decisions. Even then, consider the cost of defending an allegation. A modest limit can still provide useful protection.

Choosing cover levels and add-ons

1. Essentials - budget friendly

   • Includes: Professional indemnity £250k-£1m, public liability £1m, equipment cover optional.
   • Suited to: Early-stage freelancers with limited exposure or short engagements.
   • Typical trade-offs: Higher excesses, narrower definitions of services, fewer extensions.

2. Standard - balanced protection

   • Includes: Professional indemnity £1m-£2m, public liability £2m, employers’ liability if needed, portable equipment, cyber sub-limit bundled.
   • Suited to: Contractors delivering code, architecture, or project leadership with client access.
   • Typical trade-offs: Cyber cover may be limited and not standalone, some exclusions remain.

3. Advanced - for complex or regulated work

   • Includes: Professional indemnity £2m-£5m+, public liability £5m, standalone cyber with business interruption, contractual liability extensions, worldwide territorial limits.
   • Suited to: High-availability, fintech, health, critical infrastructure, or multi-vendor programmes.
   • Typical trade-offs: Higher premiums, stricter risk controls, more documentation.

4. Optional add-ons

   • Cybercrime and social engineering - protects against fraudulent instructions and funds transfer loss.
   • Intellectual property rights - covers allegations of infringement in code or content.
   • Business interruption - revenue loss after insured events, including cyber where available.
   • Contract review and legal helpline - early guidance to reduce disputes and claims.
   • IR35 legal expenses - support for enquiries and disputes related to status assessments.

What it costs and why - pricing drivers

Can you apply - and what insurers check

Most UK contractors trading as sole traders or limited companies can apply. Insurers typically ask for your trading status, years of experience, annual revenue, and a description of services. They may request your CV, certifications, and sample contracts or statements of work. For cyber cover, expect questions about MFA, backups, endpoint protection, patch management, remote access, and incident response plans. Larger limits can require security audits or evidence of supplier vetting.

Applications are sometimes declined if your services fall outside declared activities, if you have frequent or severe claims, or if you operate in prohibited jurisdictions or sanctioned industries. Misstated revenue, undisclosed subcontractors, or material contract terms - like uncapped liability - can also cause issues. Being precise about what you do, where you do it, and how you manage risk will usually lead to clearer terms and smoother claims.

From quote to claim - the simple path

1. Gather details - services, revenue, contracts, past claims, and required limits.
2. Get quotes online - compare limits, exclusions, excesses, and retroactive dates.
3. Assess cyber posture - confirm MFA, backups, and endpoint protection are in place.
4. Choose a level - match risk, client requirements, and budget before buying.
5. Check wording - ensure your professional services definition truly matches your work.
6. Purchase cover - keep documents, certificates, and claims contacts easily accessible.
7. Maintain controls - update software, document changes, and keep logs and backups.
8. Report issues early - notify incidents promptly and follow the policy claim process.

Weighing it up - benefits and trade-offs

Read this before you buy

Look closely at excesses on each section and confirm whether they apply per claim or per event. Check cover limits, any sub-limits for cybercrime, and waiting periods for business interruption. Review the definition of your professional services and ensure it matches your actual work. Confirm retroactive dates on professional indemnity, as gaps can arise when switching insurers. For cyber, verify security conditions like MFA, backups, and patching - non-compliance can invalidate claims. Keep renewal terms in mind, as introductory pricing may change. Store policy schedules, endorsements, and claims contacts so you can act quickly if something goes wrong.

Related policies worth considering

1. Management liability - protects directors and officers from alleged wrongful acts and regulatory investigations.
2. Legal expenses insurance - support for contract disputes, debt recovery, or tax investigations, including IR35 enquiries.
3. Portable equipment insurance - for laptops and peripherals taken to client sites or on the move.
4. Personal accident and sickness - income protection after accidental injury or short-term illness.
5. Commercial cyber - standalone, higher limits and broader wording for data breach and ransomware.

FAQs

Q: Do I really need professional indemnity as a contractor? A: If you provide advice or deliver work that clients rely on, professional indemnity is often essential. Many UK clients require it contractually and it can cover defence costs even if a claim is unfounded.

Q: Is cyber insurance necessary if I already have public liability? A: Public liability does not cover data breaches or ransomware. Cyber insurance addresses digital risks, incident response, and business interruption. Standalone policies typically provide broader, clearer protection.

Q: How much cover should I buy? A: Start with contract requirements, then consider worst-case financial loss from your services. Factor in revenue, sector sensitivity, and data volumes. Higher limits cost more but may reduce residual risk.

Q: Will IR35 status affect my insurance? A: IR35 influences contract terms, responsibilities, and potential disputes. Some policies offer legal expenses for enquiries. Ensure your services definition and indemnities align with how you actually operate.

Q: What lowers my cyber premium? A: Strong cyber hygiene helps - MFA on all remote access, regular patching, offline backups, endpoint detection, and a tested incident response plan. Clear controls can unlock better pricing and terms.

Q: Can I switch insurers without losing protection? A: Yes, but check the professional indemnity retroactive date and any run-off needs. A gap in dates can leave past work uninsured. Keep records and confirm continuity with the new insurer.

What to do next

Take ten minutes to map your real risks against client requirements. Compare quotes for professional indemnity, public liability, and standalone cyber, checking limits, exclusions, excesses, and retroactive dates. If something is unclear, ask the insurer to confirm in writing. You stay in control - choose the cover that fits your work and budget.

Important note

This guide provides general information, not personal financial advice. Policy terms vary by insurer and individual circumstances. Always read your schedule and wording carefully, check limits and exclusions, and seek professional advice if you are unsure.