# Indemnity insurance for new consultancy business



## Lee (13 Feb 2004)

I have set up a consultancy business in the area of quality management. I need to have professional indemnity insurance but do not know where to get it. Phone calls to insurance companies listed in the Golden Pages have drawn a blank. Any help on this would be much appreciated.


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## Jason (16 Feb 2004)

Hi Lee,

I too have a consultancy business (IT of all things) and we get our Professional Indemnity sorted out by Power Lynch & Associates in Stillorgan. Never had problems with them and they are fairly sharp to what our business is. To give to an idea of cost a €1,3M idemnity for IT Professioanl Services costs us about €4k per annum.

Hope this helps.


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## Jason (16 Feb 2004)

*Insurance*

If course contact details would help


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## Lee (17 Feb 2004)

Hi Jason,

 Thank you for the information.
 Very useful to get an idea of the (scary)costs involved.
 I will get in touch with your insurers tomorrow.

 Thanks again, Lee.


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## Brendan Burgess (17 Feb 2004)

Hi Jason

I found Eamon Doherty in Brennans Insurances on 639 5589

to be very helpful and knowledgeable about PI. He arranged insurance for us with Hiscox in the UK. They seem to specialise in the area.

Brendan


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## Lee (19 Mar 2004)

Brendan, 

Thanks for the information. I have been away so have only just seen it.

While I have the opportunity, I want to say thanks for your efforts on behalf of the mortgage holders at INBS. A family member is one such unfortunate. He has been helped tremendously by your advice.

Lee.


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## Cautious (19 Mar 2004)

*PI Insurance*

Hello

€4,000 p.a. seems a lot for PI insurance.  When I was a sole trader (IT Services) in the UK in 1994 to 1997, I got PI insurance from Hiscox (a name I had forgotten until now) for around £200 p.a.  This covered me for around £1 million.   That was in 1997 though and not in a rip off country, but €4 k stills seems an awful lot to pay.

If you are not already, become a limited company.  That is what I did when I moved back to Ireland.  I did not pay any PI insurance since 1997.  Liability is restricted to the assets of the company, as you are just an employee of the company.


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## Lee (19 Mar 2004)

*PI insurance*

Hello Cautious,

€4,000 p.a. not only seems like a lot of money, it IS a lot of money to someone like myself who is just starting out.

Your point about becoming a limited company is interesting. At present I am a sole trader on the advice of my financial adviser. He thought it was the best option for a no. of reasons. However in light of your comments I think it will be worthwhile exploring the issue a little further.

Thank you,

Lee.


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## Hamlet (23 Mar 2004)

*Slightly off the point but.....*

Hi there,
I'd appreciate any advice people could give re the following:
My fiance has just been offered a 6 month IT contract via an agency. It is many years since he did this kind of contract work and that was in a different country. He needs to set himself up as a sole trader or a ltd company. Can someone give me an idea as to which is the best idea? Other than the ltd risk of a company Vs unlimited as a sole trader, what other considerations are there and/or costs involved. What taxes are payable? Does sudenly corpn tax come into it? Should he be charging VAT on his invoices? Does he need to register for VAT etc?
Any help gratefully received

Hamlet


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## Cautious (23 Mar 2004)

*Slightly off the point*

Hello

Most agencies, for tax liability reasons, will not accect contractors who are not working through a Limited company.  If this is the case, try working through an umbrella company, but downsize is cost involvedand  less control over expenses, etc.  If major liability is not an option, i.e. your customer will not try to sue you for wrecking their system, or the nature of the work is not very hands on, then go for the Sole Trader option if at all possible.  Much simpler thann limited company to operate, less legal requirements etc.  However, for peace of mind you should try to get PI insurance, but not for the charge (€4k p.a.) mentioned above.  That is a rip off, and it is more cost effective to become a Ltd company, despite the hassle involved.

Taxes for ltd company can be quite cumbersome.  Set up a spreadsheet with monthly salary, Tax, PRSI etc.  Work out ceiling on PRSI contributions.  Better still pay an accountant to set up the spreadsheet for you.  Taxes for sole trader, easy, self assessment.  Pay an estimate and balance following year.  

Vat - same for both types of business structure.  Paper work every 2 months, hassle, but good discipline when preparing your accounts for end of year.  You may not need to register for Vat, if your turnover is below certain limit.  Charging Vat is expected by clients, and it allows you to claim tax back on business inputs.

Lots of good books on start your own business

Regards

C


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## MissRibena (23 Mar 2004)

*PI*

I was going to set up a legal services business a few years ago.  I was really young (19) but my local broker got me a deal through Lloyds (I think) and as far as I remember it was about £1000 for a limit of £3 million.

Incidentally ... very sorry I didn't do it now. <sigh>  

Rebecca


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## Brendan Burgess (23 Mar 2004)

*Re: PI*



> However, for peace of mind you should try to get PI insurance, but not for the charge (€4k p.a.) mentioned above. That is a rip off,



The €4k was the charge for a company with consultancy fees of €1.3m.

I don't know what an average IT contractor can expect to bill in a year? €100k to €200k? I would expect the PI insurance to be proportionately less. If you are billing €1.3m, you probably won't mind paying out €4k. 

Brendan


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## Cautious (23 Mar 2004)

*PI*

Hi

I believe that the €1.3 m indemnity refers to the maximum cover offered by the insurance company, not to the consultancy fees of the contractor, i.e. if sued for negligence, incompetence or whatever, the contractor is covered uo to the said amount.

Perhaps Lee is a first time contractor who is building up a client / skill base.  Considering that the daily rate for IT contractors has decreased greatly over the past few years, €4 k is quite a steep outlay, considering all the other overheads the contractor must cover, e.g. Income protection policies, critical illness, PHI etc.

You are right nevertheless.  If he is indeed billing €1.3m, what the hell, €4k is a drop in the ocean.  I doubt it very much though.


C


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## Lee (24 Mar 2004)

*PI*

Hi,

Finding this all very useful.

I have been in business for 8 mths. and have billed €35k in that time so as Cautious points out I'm not making a fortune considering the outlays and the fact that I have been working away from home giving rise to extra travel and accommodation costs.

However, it is early days and I feel optimistic about the future. 

I also think that the €1.3 m indemnity refers to the max.cover offered.

Does anyone think I could just do without this insurance altogether?

BTW I am a female Lee. Interesting to see that people assume entrepreneurship and maleness go together! That is not a swipe at you Cautious just my experience of how things are.

Thanks for your thoughts.

Lee.


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## Cautious (24 Mar 2004)

*PI*

Quote

--------------------------------------------
That is not a swipe at you Cautious just my experience of how things are.
--------------------------------------------

Ah, don't worry your pretty little head about it, luv.


C


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## Brendan Burgess (25 Mar 2004)

*Re: PI*

Hi Cautious

You are quite right. The €1.3m seems to be the limit of the indemnity. However,  he does say:



> I too have a consultancy business (IT of all things) and we get our Professional Indemnity sorted out by Power Lynch & Associates in Stillorgan.



So, I gather that "we" means that there are at least two of them, unless it's the royal we.

Brendan


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## Tommy (25 Mar 2004)

*Re: PI*

Hi Cautious



> If you are not already, become a limited company. That is what I did when I moved back to Ireland. I did not pay any PI insurance since 1997. *Liability is restricted to the assets of the company, as you are just an employee of the company*.



The highlighted sentence above is incorrect. Under Irish company law, company directors are now personally liable for debts incurred by a company arising from "negligence" on the part of the directors. The definition of "negligence" is very wide. Incidentally, this includes "shadow directors", people not formally nominated as company directors but who are involved in the running of the company. 

In your own case, you should talk to your accountant or solicitor about this as you may be much more exposed than you imagine.


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## Zed (25 Mar 2004)

*Interesting*

Good morning

Very interesting, Tommy.  Apart from a the more professional image of a company when dealing with clients, as opposed to a sole trader, what then are the benefits of incorporation i.e. Limited Liability.

Does incorporation compensate for the increased cost of running a Limited Company, and the extra work involved.

Any comments appreciated.


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