Professional Indemnity Insurance for IT Consultants

You’re an IT consultant, software developer, or tech advisor. You’re delivering projects, managing systems, or giving advice that your clients depend on. And if something goes wrong with that work, the financial consequences can be significant.

That’s exactly what professional indemnity insurance is for.

At Tank Insurance, we place PI for IT consultants, software developers, cybersecurity firms, and technology advisory businesses. The tech sector has its own risk profile - and its own set of PI challenges that generic insurance advice doesn’t cover. Here’s what you actually need to know.

Why do IT consultants need PI insurance?

Professional indemnity covers claims where a client alleges that your professional services or advice caused them a financial loss. For IT consultants, that can look like:

• System failure - you implement a system that crashes, causing your client business downtime and lost revenue
• Data loss - a migration you managed results in permanent data loss
• Project delays - a software project runs over time and budget, and the client claims financial loss from the delay
• Security vulnerabilities - you design or manage a system with a security flaw that gets exploited
• Bad advice - you recommend a platform or solution that doesn’t meet the client’s needs, resulting in wasted expenditure
• IP disputes - code you deliver is alleged to infringe a third party’s intellectual property

These aren’t theoretical scenarios. They happen regularly in the tech sector, and the financial consequences can be significant - especially when enterprise clients are involved.

PI vs public liability - what’s the difference for IT?

This is a common source of confusion. Many IT consultants have public liability insurance but not PI - which means they’re missing the cover they actually need.

	Professional Indemnity	Public Liability
Covers	Financial loss from your professional services	Physical injury or property damage to third parties
Example	Your system implementation fails and the client loses revenue	You accidentally damage a server rack while visiting a client’s office
IT relevance	Very high - this is your core risk	Lower - but still needed if you visit client sites
Client requirements	Almost always required for enterprise and government work	Often required alongside PI

Most IT consultants need both, but PI is the one that covers your actual professional risk. If you had to choose one, PI is it.

How much PI cover do you need?

The right cover level depends on the type of work you’re doing and the potential financial impact if something goes wrong.

Cover Level	Typical Use
$1 million	Sole trader IT consultants doing smaller projects
$2 million	Small IT firms, software developers, project managers
$5 million	Firms working on enterprise projects or government contracts
$10 million+	Large-scale infrastructure, financial systems, critical applications

A sole trader IT consultant doing day-rate advisory work has different exposure to a firm building a custom ERP system for a major enterprise client. The key question is: if this project went wrong, what’s the maximum financial loss your client could claim?

If you’re looking to take on larger projects or enterprise clients, you may need to increase your cover. We’ve helped IT firms move from $1 million to $5 million limits when they’re targeting bigger work. The cost increase is often less than people expect.

We covered the process of increasing PI limits in our guide on hard-to-place professional indemnity.

The cyber and PI overlap

This is one of the trickiest areas for IT consultants and something we get asked about regularly.

PI insurance covers claims arising from your professional services. If you build a system and it gets breached because of a flaw in your code, a client’s PI claim against you would be covered under your PI policy.

Cyber insurance covers your own business’s response to a cyber event - breach notification costs, forensic investigation, business interruption, regulatory fines.

The overlap happens when you’re both providing IT services and holding client data. Here’s how we typically advise:

• You only provide advice (no data access) - PI is usually sufficient
• You manage client systems or hold client data - you need both PI and cyber
• You build software that processes sensitive data - you need both, and you may need the cyber policy to cover third-party claims as well

Many IT consultants bundle PI and cyber together. Some insurers offer combined policies, and a broker can structure this to avoid gaps or double-ups.

If you’re in the tech space and want to understand the cyber side in more detail, have a read of our cyber security basics guide.

Key policy features IT consultants should check

Not all PI policies are created equal, and IT-specific risks need IT-specific cover. Here’s what to look for:

Retroactive date

PI is a claims-made policy - meaning the claim must be made during the policy period. The retroactive date determines how far back your cover extends. If you’ve been operating for 5 years but your retroactive date is only 2 years ago, any claims arising from work done in your first 3 years aren’t covered.

Always check your retroactive date, especially when switching insurers. We covered this in detail in our retroactive date guide.

US and Canadian jurisdiction

If you have clients in the US or work on projects with a US connection, check whether your policy covers US jurisdiction claims. Many standard Australian PI policies exclude the US because litigation costs are significantly higher. If you need US cover, it’s available but it affects the premium.

Intellectual property cover

If you develop software, websites, or digital products, make sure your policy covers IP infringement claims. Not all standard PI policies include this automatically.

Subcontractor cover

If you engage subcontractors or freelancers on projects, check whether their work is covered under your PI policy. Some policies only cover work done by employees and named directors.

Mitigation costs

Some PI policies cover the cost of mitigating a potential claim before it becomes a formal allegation. For IT consultants, this might mean the cost of fixing a system flaw before the client suffers a loss. This is valuable cover - check whether it’s included.

What does PI for IT consultants typically cost?

General ranges based on what we see in the market:

Profile	Cover Level	Typical Annual Premium
Sole trader IT consultant	$1M	$800 - $1,500
Small IT firm (under $500K revenue)	$2M	$1,500 - $3,500
Mid-size IT firm ($500K-$2M revenue)	$5M	$3,000 - $6,000
Larger IT firm or specialist	$10M	$5,000 - $12,000+

These are general ranges and will vary based on the specific services you provide, your claims history, and which insurer is most competitive for your risk profile.

Software development typically attracts a higher premium than pure advisory work because the potential for systemic errors is higher. Managed services and hosting can also increase the premium due to the ongoing nature of the risk.

Common mistakes IT consultants make with PI

Based on what we see across our IT insurance portfolio:

1. Only having PL when they need PI - public liability doesn’t cover professional service failures. If you provide advice or deliver projects, PI is essential
2. Choosing the cheapest policy without checking exclusions - some policies exclude software development, data loss, or IP claims. Make sure your actual services are covered
3. Not checking the retroactive date - switching insurers without preserving your retroactive date can leave years of past work uninsured
4. Ignoring the cyber gap - PI covers claims from your professional services, but if your own business gets breached, you need cyber insurance
5. Underestimating cover levels - a $1 million limit might seem like a lot, but a single enterprise project failure can easily exceed that

Frequently Asked Questions

Do IT consultants need professional indemnity insurance?

Yes. If you provide IT advice, develop software, manage systems, or deliver technology projects, PI covers claims where your work causes a client financial loss. Most enterprise and government clients require proof of PI before engagement.

How much PI cover does an IT consultant need?

Most start at $1 million or $2 million. Enterprise projects, government contracts, or critical system work may require $5 million or $10 million. The right level depends on your services, client size, and potential financial impact of a project failure.

Does PI insurance cover cyber incidents for IT consultants?

PI and cyber overlap but cover different things. PI covers claims from your professional services. Cyber covers your own business’s response to a breach. If you hold client data or manage client systems, you likely need both.

How much does PI insurance cost for IT consultants?

A sole trader with $1 million cover typically pays $800 to $1,500 per year. Small firms with $2-5 million cover range from $1,500 to $6,000. Higher limits, software development services, and hosting activities attract higher premiums.

Need PI for your IT business?

If you’re an IT consultant, software developer, or tech firm looking for professional indemnity insurance - or you’re not sure whether your current policy actually covers what you do - we can help.

Tank Insurance places PI for technology businesses and understands the specific risks of the IT sector, including the cyber and PI overlap.

Call us on 02 9000 1155 or email [email protected].

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This is general information only and does not take into account your objectives, financial situation, or needs. You should consider whether the information is appropriate for you and read the relevant Product Disclosure Statement (PDS) before making any decisions about insurance products.