6 Risks Overlooked By IT Contractors

Working in the insurance industry, I’ve seen my fair share of contractors facing unprecedented events that can quickly lead to a costly claim.

Have you considered these 6 ways you might be vulnerable?

Disclaimer – The following is a general guide to contractor risks and insurance. Any examples of insurance protection will be subject to the specific cover types, exclusions, limits and conditions included with your policy. Always check your policy wording or with your insurer for exact details.

1. Client disputes

Claims don’t always stem from something you yourself did wrong. Misunderstandings and differing interpretations can lead to disagreements and ultimately a claim.

The biggest culprits:

• Contract disputes – Normally boiling down to misaligned expectations like scope creep or deadlines, it doesn’t take much for a minor issue to turn into a formal dispute. All it takes is one delay, a refused sign-off or miscommunication between suppliers.
• Unpaid invoices – Sticking to deadlines doesn’t always mean you’re in the clear. Getting paid on time is probably one of the biggest sources of frustrations for contractors. Your work could get stuck in approval chains, delayed by admin or withheld if the client decides more amends are needed.

2. Unexpected time off work

As a self-employed contractor, you don’t have the safety net of employee protections like sick pay or paid leave. So, if you’re forced to take time off, it’s your income and cashflow that’s directly affected. You could be hit by:

• Personal injury – Even IT contractors with desk-based roles can have an accident travelling to meetings or have a fall while visiting client premises.
• Jury duty – Summons can come out of the blue and throw a spanner in the works if you have projects lined up and contracts you’re already committed to. Cancelling even one project is a loss of income you can’t afford.

3. Professional errors

Even the most experienced experts can make day-to-day mistakes. Maybe you misinterpreted project specs or provided files in the wrong format or even gave professional advice that was incorrect. Any delay to a project that results in financial loss for your client could prompt them to claim against you for damages.

4. Third-party claims

One mistake IT contractors make is thinking “my job isn’t manual, I can’t hurt anyone”. The reality is accidents can still happen, no matter how ‘hands-off’ your role is.

If you visit client offices or they visit you, you could be exposed to claims of third-party injury or property damage. A few theoretical case examples:

• Your trailing laptop charger trips and injures an employee at a client’s office
• You accidentally damage a monitor in a co-working space
• You knock over and damage client equipment during an on-site briefing meeting

5. Tax and legislation

With ever-evolving rules and new legislation, keeping up with your compliance responsibilities is more important than ever. They’re not always triggered by wrongdoing, so even if you do everything by the book, HMRC might still open an enquiry. And investigations can be disruptive, time-consuming and costly, leaving you paying for legal fees just to the defend the case, regardless of outcome.

6. Cyber threats

As an IT contractor, the topic of cyber threats likely isn’t new to your ears. Without anyone in-house to delegate to, cybersecurity falls on your shoulders so it’s not something to be complacent about. That’s not to mention the increased risks if you handle client data, credentials or systems access.

Even if you know your stuff when it comes to cyber attacks, it only takes one small human error to open the door for would-be criminals. And with the rise of AI, spotting things like phishing emails is becoming increasingly harder.

How to manage your risks

The risk exposure IT contractors face can paint a daunting picture, but it’s not all doom and gloom. There are simple measures you can put in place to reduce your risks and mitigate the impact of any that escalate:

1. Clear contracts and scopes of work – Make sure that any contract you engage includes clear payment terms, project scope, revisions quota, insurance requirements and responsibilities for all parties. Getting it in writing can prevent confusion and nip disagreements in the bud.
2. Cybersecurity audits – Even if you think you have a handle on cybersecurity, threats can evolve quickly. Regular audits can help spot any weaknesses, make sure security software is up-to-date and your passwords aren’t exposed.
3. Regular risk assessments – Business growth and changing industry trends and client requirements will influence your risk exposure. Frequent risk assessments will help you stay on top of emerging vulnerabilities and reduce the impact of any incidents.

How insurance can help

Insurance might seem like a burdensome admin task to tick off, but these are real risks to protect yourself against.

And, even with all the safety measures in place, IT contracts can be complex and don’t always go to plan. Insurance can be a financial backup, helping your business stay afloat if you’re hit by big fees.

Different policy types can cover different risks. So, depending on your package, your insurance could include:

• Public liability – can cover compensation costs for claims of third-party injury or damage
• Professional indemnity insurance – can cover defence fees and compensation costs resulting from a claim of professional negligence
• Legal expenses cover – can cover loss of earnings from missed work due to jury duty or legal fees in relation to contract disputes, debt recovery, or to defend certain tax and PAYE enquiries from HMRC
• Cyber liability cover – can cover business interruption, data rectification and ransom costs resulting from a cyber incident
• Personal accident cover – can pay a weekly benefit while you recover from a personal accident that impacts your income

If you want some help understanding what each policy type can cover and which ones might benefit your business, you can explore our free downloadable guide to simplifying contractor insurance.

Getting support with your insurance

Trusted by over 33,000 contractors, we’ve used our years of expertise to build a business insurance package designed for IT professionals.

Our combined IT & Technology Contractor Insurance includes standard cover like Public Liability insurance, Professional Indemnity insurance, Employers’ Liability insurance and Personal Accident Cover all under one policy. It’s designed to cover common risks that you might face, as well as be flexible to your business’ unique needs.

That’s why it can also be tailored with add-ons like Cyber Liability, Legal Expenses and IR35 Insurance.

Interested in Contractor Insurance or simply have a few questions about our cover? You can get a quote online in minutes or speak to our dedicated in-house team on 01242 808 740.

 

Disclaimer from VIQU IT – This article is provided for general information purposes only and is not intended to constitute insurance advice or a recommendation to purchase any particular insurance policy. The risks and insurance considerations discussed may not apply to every contractor or business, and insurance requirements will depend on individual circumstances, activities and policy terms.

Kingsbridge is authorised and regulated by the Financial Conduct Authority. For advice about your specific insurance requirements, please contact Kingsbridge directly.