Protecting against costly mistakes with IT consultants insurance

August 9, 2009 · Filed Under IT Consultants Insurance · Comment 

Tax, premises and staff are often the things normally associated with being the tricky parts of setting up a business. IT consultants are just the same as any other outside firm in terms of sorting out their admin and deciding what exactly they need to make a solid start. IT consultants insurance is also available and is often a straightforward way of protecting a firm from common legal threats.

Professional insurance like this has emerged because of the very real risk of being taken to court by a client in the event you or an employee of yours makes a costly mistake on a job. Money can be lost by simply failing to back up data or making an error which keeps a website down for even just a few hours. As such a client may take legal action to recover what they have lost if they think the error was your fault.

IT consultants insurance normally comes with what is referred to as professional indemnity cover which will pay out in the event of such a legal challenge, IE you or your company is sued.

In some circumstances an apology and an agreement to fix the problem can be enough but sometimes a case can emerge which would otherwise cost a firm thousands of pounds to defend and could also result in compensation being awarded in favour of the client.

Indemnity cover will often protect a consultant regardless of whether or not the claim against them is true – and will protect the firm regardless of the result of the case. Typically it will pay for the cost of hiring legal help to defend the case and will also cover the cost of compensation.

A deal normally protects against accusations a consultant has made a costly error, omission, or even committed an act of negligence in the course of their work. Often protected are formal claims a consultant has lost a client’s data, unintentionally defamed someone, or accidentally breached confidence or copyright. Public liability insurance may also be included.

The cost of the premium for this kind of insurance will often depend on the company’s size, its type of client and the qualifications of its staff. All policies also come with a maximum payout limit – the highest amount the insurance will pay out towards legal costs and compensation, which can typically be named by the applicant.

This is important because a level of IT consultants insurance which is too low can see someone end up under-insured and picking up any gap in cost themselves, while a level which is too high can result in a premium which is too expensive and is for a level of protection someone does not really need.

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