A Guide to Contractor Insurance
No matter what sector you work in, as a contractor, freelancer or small business owner it is essential to make sure you are insured against a number of different scenarios that could affect you or your business. Having your own business and working as a contractor is a rewarding way to earn a living but when things go wrong and the buck stops with you it can become very stressful, very quickly. That’s why it is important to cover your back from every angle. Not only is this good for you – it is also something clients like to see. Often when clients are looking for contractors they will specify that there are certain types of insurance the contractor must have in place. This page will provide an introduction to the different types of insurance a contractor should consider investing in:
Professional Indemnity Insurance
Professional Indemnity Insurance is a type of liability insurance that protects contractors who provide clients / customers with a professional service or some kind of professional advice. In the event of some kind of legal claim being made against you by a client and you facing massive legal costs (and potentially massive compensation costs) professional indemnity insurance will protect you and cover all of these eventualities. Should the unexpected arise, having professional indemnity insurance will save your business and allow you to keep on contracting. Indeed many clients and many professional bodies insist on you having it in order to operate as a contractor.
Public Liability Insurance
If your business has any interaction with the general public or you have the general public coming on to your place of business and someone gets injured or receives a damage to their personal property then you face being held liable for that injury. In such an instance it is essential that you have public liability insurance. Being covered by PL insurance against your business injuring a third party or their property is an absolute must for any business including that of contractors who run an office or premises where people might visit. Any claim against you, whether real or spurious could end up bankrupting you in legal fees alone, so it is worth having this insurance in place to cover any such potential costs.
Employers Liability Insurance
If your work as a contractor leads to your business growing and you needing to hire other people to help you or to do other jobs on your behalf then you will technically be classed as an Employer. And the moment that happens you are legally required (if you are a business operating in the UK) to get yourself some Employee Liability Insurance. As an employer you are considered to be responsible for your employees health and safety when they are at work or working for you. If one of your employees sustains an injury or becomes ill whilst working for you, it is very likely you will find yourself facing a claim for compensation if they believe you to be responsible. The whole point of Employers Liability Insurance is that you will be covered in the event of such claims. Once you are covered, you can relax knowing that if such a worst case scenario does come along and someone is injured on-site or falls ill, you and your business will not go under. Employers Liability Insurance should normally cover you for a minimum of £5 million but most businesses these days opt for a minimum coverage of £10 million.
With all the issues that contractors have to face involving IR35 compliance and limited company formation versus umbrella companies, tax insurance is a new type of insurance that is growing in popularity. Investing in a policy that covers you against all the hassles and problems associated with an investigation by HMRC for IR35, VAT disputes and other issues is seen by many contractors as a way of putting compliance issues to one side.
Office insurance is similar to the more traditional home insurance that most people are used to shelling out for. In the same way as you insure your home and property, you also need to insure your office in case of accidents, fires, floods or theft. Imagine how costly it could be if all of your office computers, printers, photocopiers, laptops and other equipment were stolen or destroyed by some freak accident. Office insurance, unlike some of the others mentioned here, is not compulsory by law, but it is probably just as important to your business if you work mainly from an office. On the other hand, as a contractor it might be that you work out and about most of the time and have little reliance on an office in which case you might not need such insurance.