This is not insurance advice and I am not a broker. It is what my clients asked for over fifteen years of consulting, what I carried, and the one occasion it mattered. Your cover requirements depend on your sector, your clients and your work, and the person to settle that with is an insurer or a broker.
With that said, this subject gets almost no honest coverage, and the people who need it most are three weeks into a practice and about to hit a wall they cannot see.
Two reasons, and the second one is the expensive one
Professional indemnity has been non-negotiable for me since the day I started, and for two quite different reasons.
It sits alongside your company structure rather than replacing it - the sole trader or limited company decision settles who a claim lands on, and the insurance deals with the claim itself.
The first is the legitimate one - the reason the product exists. If something goes wrong, if advice you gave is challenged, you are protected rather than personally exposed.
The second is credibility, and it is the one that costs people work.
I have seen a great many good consultants win a client verbally, get all the way through to the due diligence process, and lose the engagement there - because they had no cover in place.
Sit with the sequence. The client wanted them. The conversations went well. The commercial terms were agreed. And then a procurement or compliance team asked for evidence of professional indemnity insurance, and the answer was that it was being sorted out, and the momentum died. Nobody in that process is being unreasonable. It is a box, and an unticked box in a compliance review does not care how good you are.
That is the failure this article exists to prevent, and it happens to people who are perfectly good at the work.
How much cover clients actually ask for
You do not really set this number. Your clients do.
| Client type | What they asked for |
|---|---|
| Most mid-sized UK organisations | £5m |
| One organisation I worked with | £10m |
| A large insurer, data-sensitive work | £20m, mandated in contract |
Five million is the level most mid-sized UK organisations expect, and it is the level most consultant policies are written at, which is not a coincidence. If you are selling into that market, that is your working number.
Above it, the requirement tracks the sensitivity of what you are touching rather than the size of the fee. The twenty million requirement above came from working with a UK life assurance database - and that is entirely reasonable of them, given what was in it.
The practical approach is to hold what your target clients ask for, and treat anything unusual as part of the contract negotiation rather than a reason to panic. Which brings up something worth knowing.
A mid-engagement increase need not be expensive. When that client mandated twenty million where I had been carrying ten, I fully expected a premium hike proportional to the cover hike. There was none. The insurer wrote a side note into the contract and that was that. Very old-school insurance: you spoke to a person, they listened, they understood, they acted. Do not assume a client's unusual requirement will price you out of the work until you have actually asked.
What the cover does beyond the obvious
Professional indemnity covers a wider range of situations than most people assume when they buy it. It is not only about a project going wrong.
It extends to the advice you gave, the services you offered, and how you handled client data - and for a fractional operating inside somebody else's systems, that third one is a larger part of your exposure than it first appears.
But the part that mattered most to me was dispute resolution.
Not a payout. The presence of somebody whose actual job is to establish the facts and deal with the other side's legal or compliance function, at exactly the moment when you would otherwise be doing that alone, at speed, with your income at stake and no idea what you are doing.
What it looked like when I needed it
I was working with a large insurance business. They had a data breach in one of their offshore data centres.
I had no access to that data centre. I had never been near it, and had no involvement of any kind. Their knee-jerk reaction was to put every consultant on notice.
Which is worth pausing on, because it is the part people do not expect. I did nothing wrong and it was still my problem. When something serious happens inside a large organisation, the immediate institutional response is to draw a circle around everybody who could conceivably be involved and deal with the specifics later. If you are inside that circle with no insurer behind you, you are negotiating with a corporate legal team on your own.
I contacted my insurer. They worked directly with the client to demonstrate that I was clean, that there was no implication and no involvement. It was resolved and I went back to work.
That is the whole story and it is deliberately undramatic. There was no claim and no payout. What the policy bought was a competent third party handling something that would otherwise have consumed weeks and quite possibly ended the engagement regardless of the facts.
When to put it in place
Two things, in this order.
Get quotes as soon as you go to market. Ring around, get prices, know your numbers. This costs nothing and it means the question can never delay a deal.
Have the policy live before you start work. I did not put mine in place until the first client landed, and I still think that is sensible - there is little point paying premiums during a period when you have no clients and no exposure. But the gap to avoid is real: being asked for evidence during due diligence, or worse, starting work, without a bound policy.
The practical trigger is due diligence itself. If a client has reached the point of asking for evidence, they are usually close to completing - so that is the moment to bind the policy, not the moment to start getting quotes. If you already have the quotes, that is a same-day job. If you do not, it is the week that kills the deal.
Who I use
I use Hiscox for all of my consultancy work, and have for years.
Three reasons, all of them my own experience rather than a market claim. They are long established. They write a consultant's policy at around the five million level, which is the right shape for this kind of practice. And they are one of very few insurers I have dealt with where the premium got cheaper year on year as the relationship continued, rather than creeping up because renewal is easier than switching.
The twenty million story above was them, and so was the data breach. Both times I spoke to a person who listened and acted, which is not what I get from most of the market.
That is a recommendation from experience, not advice for your circumstances. Prices move, policies differ by sector, and what suits a technology consultant may not suit somebody advising on regulated financial services. Shop around, and read what is actually covered rather than the headline number.
Say you have it, once you have it
When you have the cover, use it commercially. Reference it in your offer documents, and mention it when you are talking to clients. It is a strong credibility marker - it says you are running a business rather than testing whether you like being independent.
One condition, and it is not negotiable. Say it only when it is true.
Stating a level of cover you have not yet bound is a misrepresentation, and it will be discovered at the exact moment it does maximum damage: during due diligence, on a deal you have already won, in front of the compliance team whose entire function is to check. The reputational cost of that lands not on the policy but on you, and it is a great deal worse than the honest answer, which is that you are covered from the point of engagement.
If you are not yet covered and you are asked, the answer that works is the truthful one: cover is arranged and binds on engagement, and here are the details. That is a normal commercial position. The other one is a story you will have to keep telling.
Frequently Asked Questions
Do fractional consultants need professional indemnity insurance?
In practice, yes, for two separate reasons. The first is the obvious one: protection if advice you gave is challenged. The second is commercial, and it catches more people out - a great many good consultants win the work verbally, reach the client's due diligence stage, and lose it there because they do not have cover in place. The insurance is a qualification requirement long before it is ever a claim.
How much professional indemnity cover do fractional consultants need?
In my experience most mid-sized UK organisations expect five million pounds of cover, and that is the level most consultant policies are written at. One organisation I worked with wanted ten million, and a large insurer mandated twenty million in contract because of the sensitivity of the data involved. The number is set by your clients rather than by you, so the practical approach is to hold what your target clients ask for and treat unusual requirements as a contract negotiation.
When should I put professional indemnity insurance in place?
Get quotes as soon as you go to market so you know your numbers, and have the policy live before you start work for a client. I did not put mine in place until the first client landed, which is a reasonable way to avoid paying for cover during a period with no engagements - but the gap to avoid is being asked for evidence during due diligence, or beginning work, without a bound policy. Once a client is in due diligence they are usually close to completing, so that is the moment to bind it.
What does professional indemnity insurance actually cover?
More than most people assume. It is not only about a piece of work going wrong. It extends to the advice you gave, the services you offered and how you handled client data. The part that mattered most in my own experience was dispute resolution - having somebody whose job is to establish the facts and deal with the client's legal team, at a point when you would otherwise be doing it alone and badly.
Which professional indemnity insurer do you use?
Hiscox, for all of my consultancy work. They are long established, they write a consultant's policy at around the five million level that suits this kind of practice, and in my experience the premium got cheaper year on year rather than more expensive. When a client mandated a cover increase mid-engagement they handled it by writing a side note into the contract with no premium hike. That is my experience rather than a recommendation for your circumstances, and my advice has always been to shop around.
Should I mention professional indemnity insurance to prospective clients?
Yes, once you hold it. Reference it in offer documents and in conversation, because it is a strong credibility marker - it signals that you are running a business rather than trying one out. Say it only when it is true. Stating cover you have not yet bound is a misrepresentation that will be discovered at precisely the moment it does the most damage, which is during due diligence on a deal you have already won.
Where to go from here
The single most useful thing on this page is the smallest: get the quotes now, before anybody asks. It costs nothing, it takes an afternoon, and it converts a deal-killing delay into a same-day administrative task.
Cover is one of three things a compliance review will ask for. The other two are the paperwork and the payment position, covered in what a fractional engagement contract actually looks like and invoicing and payment terms.
The Ultimate Guide to Fractional Consulting is free and it goes deeper on this. Cover is one line in a longer sequence, and the guide sets out the whole order - what to have in place before you leave, what finished looks like at each step, and the two questions worth answering before you go.
The Fractional Formula builds the commercial side - ICP, offer, profile, pipeline and price - in six weeks. Pieces like this one go out first in Fractionally Thinking, every Friday.
