How much professional indemnity do IT contractors need?

Reviewed by Matthew Bartlett, Director, Apex Insurance Brokers Limited · Last reviewed 2026-08-06

Almost every IT contractor meets professional indemnity (PI) insurance the same way: you win a contract, the paperwork lands, and buried in the schedules is a line that says you must hold PI cover of "not less than" a stated amount. Suddenly a limit you have never thought about becomes a condition of getting paid. This page walks through how to think about that number properly — not as a box to tick, but as a genuine measure of the risk you carry when you write code, configure systems or advise a client on their technology.

We will keep this concrete to IT work and avoid pretending there is a magic figure. There isn't. But there is a sound way to reason your way to the right limit.

What actually drives an IT contractor's PI limit?

Three things push the number, roughly in this order of practical weight.

The contract. This is usually the decisive factor. Recruitment agencies and end clients frequently specify a minimum PI limit as a condition of engagement, and they will not waive it because you think it is too high. If the master services agreement or agency terms say you must carry a particular limit for the duration of the assignment, that figure is effectively your floor. It is worth stressing that PI is not a statutory legal requirement for IT firms in the UK — no law forces a contractor to buy it. It is a contractual requirement, imposed by the people who hire you because they want recourse if your work causes them harm.

The size and risk of the project. A contractor building an internal reporting dashboard for a 20-person business carries a very different exposure to one architecting a payments platform for a financial services client. The bigger the system, the more people rely on it, and the more money flows through it, the larger the potential claim if something goes wrong. Your limit should reflect the most exposed work you take on, not your smallest job.

The potential loss if it goes wrong. PI responds to claims that your professional work — negligent code, a flawed integration, missed requirements, poor advice — caused a client financial loss. The right question is not "what do I earn?" but "if my mistake took down a client's system or corrupted their data, what could they credibly claim from me?" That figure can dwarf your day rate.

Is professional indemnity even the same as tech E&O?

Yes — and this trips a lot of contractors up when they read international contracts. Technology professional indemnity (often called tech PI) and technology errors and omissions (tech E&O) are broadly the same thing. "Errors and omissions" is simply the term used in the United States for what UK brokers call professional indemnity. If a US-headquartered client's contract asks you to carry "E&O cover", they are asking for the professional indemnity policy you would recognise here. You are not being asked for a separate, exotic product.

The reason this matters for your limit is that international clients often specify E&O minimums in dollars and may expect broader wordings. Your PI policy should be able to sit comfortably against those requirements, which is exactly the kind of thing worth checking before you sign rather than after. For the wider picture of what this cover does, our guide to technology professional indemnity insurance goes into the scope in detail.

How do I read the PI requirement in an agency or client contract?

Contract wording is not standardised, so read it carefully. A few things genuinely change what you need to buy:

• The stated minimum limit. "Not less than" a figure means exactly that — the amount your policy must pay out per claim, or in aggregate, depending on how it is written. Check whether the requirement is per-claim or in-the-aggregate, because they behave differently over a busy year.
• The duration. Many contracts require you to maintain cover not just during the assignment but for a period after it ends, because IT claims often surface long after the work is delivered. PI is written on a "claims made" basis, meaning the policy that responds is the one in force when the claim is made, not when you did the work. Letting cover lapse the day a contract ends can leave you exposed to a later claim.
• Other cover bundled in. Agencies commonly ask for public liability and, if you employ anyone, employers' liability alongside PI. Read the whole schedule, not just the PI line.

If a requirement looks unusual or disproportionate to the work, that is a conversation worth having before you commit. An Apex specialist can read the clause with you and tell you whether a standard limit meets it or whether the client is asking for something wider.

Larger or more complex risk? Speak directly to a director — call 0117 325 0027 or email info@apexinsurancebrokers.co.uk.

What limit should I choose if no contract specifies one?

Sometimes you are between assignments, working direct with small clients who never mention insurance, or setting up cover before you have a specific engagement lined up. Here the contract cannot decide for you, so you reason from exposure instead.

PI limits are usually offered in generous, round tiers — commonly illustrated as options such as £1m, £5m or £10m of cover. Which of those illustrative tiers fits depends on the kind of clients you want to work with and the damage a serious mistake could do. A contractor who mostly serves large enterprises or regulated sectors will typically find those clients demand higher limits as standard, so buying toward the upper tiers keeps you eligible for the work. A contractor doing lower-stakes builds for small businesses may find a lower tier proportionate. The point is to pick the limit that both matches the clients you are targeting and would realistically absorb your worst credible claim — not to default to the cheapest option and hope no big contract comes along.

Treat these figures as illustrative starting points, not rules. Two contractors with identical day rates can need very different limits because one touches critical infrastructure and the other builds marketing microsites.

Does my PI limit have anything to do with IR35?

No, and it is important to be clear about this because the two topics often get muddled. IR35 — the off-payroll working rules — is a tax matter. It concerns whether, for tax purposes, you are genuinely operating as a business or are effectively an employee of your client. Holding professional indemnity, or holding a higher limit, does not change or determine your IR35 status. Insurance and employment status for tax are separate questions decided on separate criteria.

Carrying your own PI, public liability and other business insurances can form part of the wider picture of operating as a genuine business, but no policy makes you "outside IR35" and none of it substitutes for a proper status determination. For your actual IR35 position, speak to a qualified accountant or tax adviser — that is their expertise, not a broker's. Buy your PI to match your contracts and your risk; handle IR35 with the right professional.

Where does cyber cover fit alongside PI?

PI and cyber insurance answer different problems, and most serious IT contractors end up considering both. PI responds when your professional work causes a client a financial loss. Cyber cover responds when there is a security incident — a breach, ransomware, a data compromise — and typically helps fund the response to it: incident response and forensics, business interruption while you recover, and third-party liability where others are affected.

One area to be precise about is regulatory fines. Under UK data-protection law — the UK GDPR and the Data Protection Act 2018, enforced by the Information Commissioner's Office (ICO) — a serious data breach can lead to regulatory action. Whether such fines can lawfully be insured in the UK is legally uncertain, and policies often exclude or restrict them. So do not assume cyber insurance will simply pay a GDPR fine on your behalf; its real value is in funding breach response, covering business interruption and meeting third-party liabilities. If you handle client data as part of your contracting, that response funding matters. Our explainer on cyber insurance and the comparison of professional indemnity versus cyber insurance for tech companies both set the two side by side.

Because the two overlap at the edges, many contractors prefer a combined technology policy bringing tech PI and cyber together, which avoids gaps between two separate contracts. When you are deciding your PI limit, it is worth deciding your cyber approach in the same conversation.

What else should be on my radar besides PI?

PI is usually the headline cover for an IT contractor, but it rarely stands completely alone. Two others come up constantly.

Public liability covers injury to people or damage to property arising from your business activities — relevant if you visit client sites. Agencies often require it alongside PI.

Employers' liability is different in kind: once you employ staff, it is a legal requirement under the Employers' Liability (Compulsory Insurance) Act 1969, with only narrow exceptions. If you take on your first employee — even part-time — you generally must hold it. A sole-trader contractor with no employees typically will not need it, but the moment you hire, it becomes a compliance issue rather than a choice.

If you are building your cover from scratch, our overview of IT contractor insurance and the broader guide to what insurance an IT company needs map out how the pieces fit together.

A simple way to land on your number

Put the reasoning together and you get a workable process. First, take the highest PI limit any live or likely contract requires — that sets your floor. Second, look at your most exposed piece of work and ask what a client could realistically claim if it failed badly; if that figure exceeds the contractual floor, lean toward a higher tier. Third, think about the clients you want next year, not just this month — if you are moving upmarket, buy the limit that keeps you eligible. Finally, review it whenever you win a materially bigger contract, because the right limit at the start of a career is rarely the right limit three years in.

Done this way, your PI limit stops being an arbitrary number on a form and becomes an honest reflection of the risk you carry. That is exactly the judgement a specialist broker exists to help you make — matching the wording to your contracts, checking the claims-made mechanics, and making sure the limit holds up if the worst happens.

Apex Insurance Brokers Limited is authorised and regulated by the Financial Conduct Authority (FRN 724952). This article is general information, not advice on a specific policy or a recommendation to buy any product.