Insurance 101

It won’t happen to me…the illusion of control

During the Sherpa customer interviews in Q4, 2014, every Project Professional interviewed insisted that “they would not be at risk of a claim”. The reasons for this view included:

  • “I’m too competent at what I do”
  • “I never sign anything off”
  • “I’m too insignificant for XYZ corporate to sue me”
  • “They’re only interested in the big consulting firms or big integration firms…not an individual contractor like me”

The reality is not quite so rosy.

Although the number of Australian law cases for professional indemnity are few, many claims do not reach the courts.

What is more common, is that legal action will be taken against the suppliers (for example Project Professionals). The legal action may not make it to a law court, but are settled or closed before reaching court. The downside is that the supplier (again Project Professionals) will still need to defend themselves, often engaging a lawyer. 

Sherpa Insurance does not provide individual advice.

A year in a life as a Management Consultant and Project Professionals

As an independent Project Person, you often work for a number of different customers. For many Project Professionals, a working year may look like this:

  • January to May – contract with a large bank
  • June to November – contract with a government department
  • December – no contract, enjoying the Christmas break

Before you can start work, in most cases, your customer will ask you to provide proof that you have three main insurances in place:

  1. Professional Indemnity
  2. Public Liability
  3. Workers Compensation

What are these three insurances?

Professional Indemnity

– If a mistake happens in your work that results in financial loss or injury to a third party (e.g. your customer)—that customer may take legal action against you to recover their losses. Professional Indemnity insurance seeks to protect both your assets and your reputation. Regardless of the size of  your business, Professional Indemnity claims can be costly.  And even if you are not at fault, you may still need to defend yourself and pay legal costs.

Levels of cover vary and are often set by your client.

Most Project Professionals hold between $5m to $10m of Professional Indemntity cover.

Public Liability

– If someone is injured, or has their property damaged while you are providing a service to them (i.e. your customer), Public Liability provides protection against your legal costs. Like Professional Indemnity, Public Liability claims can be costly, and even if you are not at fault, you may still need to pay legal costs to defending yourself.

Levels of cover vary and are often set by your client.

Most Project Professionals hold between $10m to $20m of Public Liability cover.

Workers Compensation

– If you get injured in the course of your work, Workers Compensation is designed to protect your income while you recover. This is done in exchange for removing the employee’s right to sue their employer. Each Australian State or territory runs its own version of Workers Compensation.

Sherpa Insurance does not offer Workers Compensation, but there are many organisations that do.

There are no levels of cover for Workers Compensation as it is based on income and job category.  A current Workers Compensation certificate is normally required by employers.

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