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Short answer. A contractor working through their own limited company normally has to arrange professional indemnity insurance in the company’s name, because the company is the contracting party. A contractor engaged through an umbrella company is usually covered by the umbrella’s own policy, but only for work performed under that engagement. Ask for written confirmation of the limit, the insured entity and the retroactive date.
Since the off-payroll working reforms in the private sector took effect on 6 April 2021, extending the ITEPA 2003 Chapter 10 regime to medium and large end-clients, many IT contractors have moved from a personal service company (PSC) to an umbrella company employment. That structural change alters who buys professional indemnity (PI) insurance, whose name appears on the policy, and who carries the historical exposure once an engagement ends. A professional negligence allegation may not surface until months or years after delivery, by which point the trading structure may have changed.
Apex Insurance Brokers arranges PI cover for IT contractors under both structures and this entry sets out the practical differences.
Where the contractor operates through their own limited company, PI is placed in the company's name. The insured entity is the PSC, and the contractor as director controls every material term:
End-client contracts commonly require PI named in the contractor's own trading entity — a bank or public-sector body will want the certificate to show the PSC as the insured, not a third-party umbrella. A policy held by an unrelated umbrella employer may not satisfy that contractual requirement.
An umbrella company employs the contractor under a contract of employment for the purposes of the Employment Rights Act 1996, deducting PAYE and National Insurance at source. HMRC's guidance at ESM10500 onwards describes the arrangement. Some umbrellas — particularly those accredited under the Freelancer & Contractor Services Association (FCSA) standard or the developing umbrella company code of practice — provide a group PI policy covering their employed contractors.
For a low-value, short-duration engagement an umbrella's group PI may be sufficient. For a six-figure engagement with a regulated end-client, a contractor-named policy is generally the safer position.
Both the limited company and umbrella routes rely on claims-made cover, which is why a gap between them matters so much.
| Feature | Claims-made (UK professional indemnity) | Occurrence (typical liability wordings) |
|---|---|---|
| What triggers the policy | A claim first made against you during the period of insurance | An event, injury or damage occurring during the period of insurance |
| Which policy year responds | The one in force when the claim is made or the circumstance is notified | The one in force when the event happened, whenever the claim arrives |
| Cover for past work | Only back to the retroactive date in the schedule | Not applicable — the date of the event governs |
| If you stop trading | No cover for later claims unless run-off is bought — ARB expects a minimum of six years, five in Scotland | Past policy years continue to answer for events that happened while they were live |
| Notification of circumstances | Central: notifying a circumstance in the period fixes the claim to that policy year | Less central: the date of the occurrence already fixes the year |
| Effect of a gap in cover | A gap can leave historic work uninsured for good | A gap only affects events during the gap |
Sources: ARB PII Guidance paras 6.1–6.2 on the claims-made basis and run-off (arb.org.uk); RIBA Guide to Professional Indemnity Insurance 2024, glossary entry “Claims Made” (riba.org); SRA Minimum Terms and Conditions clause 5.4 on six-year run-off (sra.org.uk).
The IR35 reform of April 2021 pushed a significant number of contractors from PSC to umbrella mid-career. PSC PI is written on a claims-made basis — the policy that responds is the one in force when the claim is notified, not the one in force when the work was done. Once the PSC stops buying PI, an allegation notified later has no policy to attach to.
Run-off cover extends the PSC's PI for a defined period (commonly six years, aligning with the primary limitation period under the Limitation Act 1980) after the company ceases trading. It is the contractor's decision, not the umbrella's, to place it.
Worked example — for illustration only. A contractor completes a six-month engagement with a UK bank through her PSC, delivering a payment systems configuration. The engagement ends in March. From April she moves to an umbrella for her next engagement, and her accountant advises striking off the PSC. Eight months later the bank alleges a configuration error in the earlier work has caused a reconciliation loss.
Scenario A — run-off placed. The PSC's PI insurer, on notification, treats the claim as a valid circumstance under the run-off policy. Defence costs and any indemnifiable settlement fall within the run-off limit.
Scenario B — no run-off. The PSC's PI lapsed on strike-off. The umbrella's group PI is irrelevant because the alleged error pre-dates the umbrella employment. The contractor is uninsured for the historical work and personally exposed if the bank pierces to her as director of the dissolved PSC.
Apex Insurance Brokers Limited is authorised and regulated by the Financial Conduct Authority. Firm reference number 724952. This entry is general information, not advice on any particular policy.
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