A contractor is a person or firm that undertakes a contract to perform a service or do a job. Every contractor needs to have faith in their skills and abilities. This is true for contractors across every industry. However even for the most experienced contractor, accidents can and will happen. You need to have the right contractor insurance in place for when this happens. This not only helps you, this helps to maintain your professional reputation, client relationships and protect your business. Here we explain who needs contractor insurance and why.
Who Needs Contractor Insurance and Why
Most often a contractor works alone and manages your own business in its entirety, typically as a limited company of one person. You can find out more about registering as a limited company versus self employment in our comprehensive guide. Working in this way means that you hold full responsibility for any mishaps at work. A contractor does not benefit from the same assurances that are offered to employees, such as life, disability or accident cover. This is one of the reasons why you will be commonly asked to provide proof of your professional indemnity insurance by your clients, before they will enter into a contract with you. This type of contractor insurance safeguards both of you and them from financial loss in the event of an accident.However, simply providing a cover note for what you are asked for by clients is bare minimum. To protect yourself properly with contractor insurance, you need to look at the ways in which you work.
What Type of Contractor Insurance Do You Need?
There is actually no specific contractor insurance product that you can buy ‘off the peg’. Contractor insurance is more of an umbrella term that is used to cover the types of business insurance that applies to various types of contractors. This means that you need to build your own policy. One which combines the types of cover that protect you specifically in your line of industry. The most common types of insurance that contractors use are professional indemnity insurance, public liability insurance and employers liability insurance and personal accident insurance. Other types of insurance depending on the way you work could be tax liability insurance, office insurance and travel insurance.
Professional Indemnity Insurance
This type of contractor insurance protects you if you trade in a service as opposed to a product. It provides cover for claims and legal costs if your actions unintentionally cause your client to lose money or something else of value. This type of insurance is commonly used by professionals who provide a service, typically IT professionals, solicitors, engineers. Professional indemnity insurance is good practice for contractors who provide professional advice. It is commonplace for a client to request proof that you have this cover, before committing to working with you.
Public Liability Insurance
Public liability insurance provides cover if your service or equipment causes harm to members of the public, or damages their property, this insurance covers you for any claims made against you. It does not cover faulty workmanship. Its purpose is to cover you in the event of a member of the public tripping over or walking into your equipment and sustaining an injury. This is appropriate for contractors who work in public or client spaces. This insurance is commonly a contractual requirement for those working in live events, including training events and seminars.
Employers’ Liability Insurance
This contractor insurance is a legal requirement to a minimum cover of £5 million if you employ anyone. This includes paying anyone, including other contractors, who are working under your direction and supervision. In this case it is possible to be fined up to £2,500 per day if you fail to prove you have this insurance. Employers liability insurance covers you for any illness or injury that your employee sustains as a result of working for you.
Personal Accident Insurance
Personal accident insurance covers you if you become seriously injured while working as a contractor. This is particularly worthwhile for contractors who trade in labour intensive or high risk work, since you do not benefit from cover for accident or disability from an employer.
Tax Liability Insurance
This insurance protects you should HMRC open an enquiry into your accounts, including IR35 enquiries, tax compliance reviews or a VAT dispute. All of which Prestige Business Management can support you with as part of our comprehensive service.
Office Insurance
This protects your workspace against damages from fire, flood or burglary.
Travel Insurance
If you are a contractor and you travel abroad for work, this cover protects your business equipment, company money and personal possessions. It also covers medical treatment and legal fees, should you have an incident while travelling.
Where to Buy Contractor Insurance
Due to the number of different types of contractor insurance, it is good practice to seek out an insurer who specialises in your industry. Ask around within your sector for a recommendation. An experienced insurer will be able to recommend a package of contractor insurance that covers your specific needs and calculate how much cover you require for your scale of business.
Prestige Business Management Works for you
Prestige Business Management can provide custom business management and support services for small businesses. Find out what we can do for you. Call us today on 0203 773 2927.
