Why do project managers need insurance?
As a project manager, you juggle several balls at any given time, especially on a multi-stream project. Despite doing everything right, unpredictable circumstances can always affect the outcome of your work.
Contract non-compliance
Most contracts you will engage with as a project manager will stipulate you must have and show proof of professional indemnity insurance.
Damage to your work equipment
You are likely to use your laptop or computer for your work; if that gets stolen or damaged, could you afford the repair or replacement costs?
IR35 enquiries and unpaid invoices
Depending on whether you use an umbrella company or contract directly, you may be exposed to IR35 enquiries from HMRC. Regardless of how you're engaged, you still could be subject to late or non-payment of invoices.
Accusation of causing a financial loss
An unhappy client may allege your management services cost them money, which they now want to recover from you.
Professional indemnity insurance for project managers
Professional indemnity insurance protects project managers from accusations of professional mistakes, negligence or failing duty of care.
As a project manager, you hold a significant role with varying responsibilities depending on the project's size and impact on the client. It's crucial to weigh the potential consequences if your advice leads to a dispute with the client, as the costs could be significant.
To protect yourself, consider professional indemnity insurance, which is both affordable and provides valuable protection in case you need to defend yourself.
What does project manager professional indemnity insurance cover?
Professional indemnity insurance protects project managers from claims or accusations of wrongdoing from their professional advice or work product.
Cover includes:
- Failing your duty of care
- Making a mistake
- Acting negligently
- Giving the wrong advice or recommendation
For example, you’re asked to pay damages because your client believes that:
- The delay in project delivery cost them money
- The outcome of your work caused further costly issues
- The subcontractors you used didn’t deliver
- You made the wrong decision or recommendation, which damaged your client’s business
What professional indemnity limit do project managers need?
When determining your professional indemnity limit, it's essential to consider specific factors. These factors consist of the professional indemnity limit mentioned in your contract and the potential cost incurred if your advice results in a negative outcome.
Switching your professional indemnity insurance
If you cancel your professional indemnity policy in the UK, you cannot make any claims against it.
Therefore, when switching to a new project manager insurance provider, it is important to ensure that your new policy includes coverage for your previous work, referred to as "retroactive cover".
Should I keep professional indemnity insurance if I take a break from project management?
It’s wise to keep your professional indemnity if you retire or take a break from project management. Claims against professional misconduct can surface months or years after you delivered the work.
If a past client sues you for damages and you have cancelled your professional indemnity, you will not be covered.
How long you keep your cover in place is up to you; consider the type of projects you worked on and the likelihood that a client might bring a claim against you.
Other insurance project managers buy
As a project manager, you may need to consider additional insurance policies depending on your circumstances. Could you handle a legal dispute if it arises? How would negative publicity impact your business? Do you have the financial means to replace a lost, stolen, or damaged computer? And if you become ill, how would you cover your business expenses?
Commercial legal expenses
Most commercial legal expenses insurance will protect project managers against various tax and legal issues you may encounter due to your profession, which are not covered by professional indemnity or public liability.
At Suited, we combined £100,000 of commercial legal expenses insurance with helplines and other tools to better assist project managers in dealing with these issues. We call this Business Legal Protect, and it’s part of your subscription.
Business Legal Protect offers qualified advice and assistance with:
- Legal and tax matters concerning your business
- Criminal prosecution
- Unpaid invoices (over £200)
For example:
- HMRC investigates your tax affairs
- You are facing an investigation from a professional body
- You need legal help chasing a significant unpaid invoice
- You’re being taken to court for breach of contract
Electronic business equipment insurance
In today's world, project managers often rely on electronic equipment to carry out their work. Obtaining electronic business equipment insurance is wise to safeguard your assets if your business depends on electronic equipment.
Public liability insurance for project managers
Public liability insurance shields project manager from claims of injuries or property damage.
If your job involves physical contact with clients, their staff, property, or other third parties, it is important to have public liability coverage.
The likelihood of someone making a claim against you varies depending on your industry. Property damage claims are more common in fields like construction project management than in non-manual professions like IT project management.
However, even in non-manual professions, public liability coverage should not be dismissed, as it is still important to have protection.
Shopping for project manager insurance
When searching for project manager insurance, there are several factors to consider.
Cheap project manager insurance
Although cost is important to UK buyers, reviews suggest that focusing solely on this factor may lead to cover changes and claims issues.
Be aware of additional fees
Understanding how easy it is to make changes to your cover and the associated costs is crucial. Additionally, if you pay monthly, be aware of any APR and ensure it is reasonable. Some policies may also include a policy fee.
The reputation of the insurer is important
It is essential to know what is expected of you in a difficult situation with a client. Who will handle your claim? Will you be responsible for any legal costs? Is compensation included? Understanding the level of service provided by your selected cover is key.
Many providers charge fees to amend or cancel
Be aware of your insurance provider's cancellation or "hibernation" policy. Some may charge a fee and require a month's notice, resulting in additional costs.
Some policy wordings are restrictive or have a high excess
All insurance providers are required to provide full cover documentation before purchase. Although legal covers can be complex and dull, it is essential to read the product summary, which outlines the cover basis and exclusions.
