When starting up as a contractor, taking out appropriate insurance should be one of the top things on your to-do list.
Why do you need it?
Rather than being just another cost to factor in, insurance can help you secure that first contract, as most clients and agencies will insist that you’re sufficiently insured before investing in your services.
There are other benefits in seeking protection from insurance, beyond the obvious peace of mind that it brings: it provides you with cover should you be accused of causing property or reputational damage. Insurance also acts as a key IR35 status indicator, signifying to HMRC that you’re genuinely self-employed and not a ‘disguised employee’.
To put it plainly, having appropriate protection in place makes business sense and gives you credibility. The question is, what business insurance do you need?
The answer will vary depending on your area of business. But there are three types of insurance that nearly all contractors will require:
1. Professional Indemnity
It goes without saying that you want to do a great job for your clients, for reasons of professional pride and repeat business, but sometimes errors or omissions can occur which can cause a relationship to go sour.
Being accused of professional negligence is just about every contractor’s worst nightmare, but when you have Professional Indemnity insurance, you don’t live in fear of an accusation by a client that your work has cost them money. It provides cover for legal defence costs and if damages are awarded against you.
2. Public Liability
If your line of work dictates that you have to work in someone else’s premises or out in the field, then you’ll need Public Liability insurance. It provides protection in the event of an accident while supplying services; for example, injuring a passer-by or breaking a valuable piece of equipment.
The protection will cover the cost of any potential lawsuits, replacements, legal fees, medical bills and compensation resulting from an accident. Failure to take out Public Liability can lead to you having to pay compensation out of your own pocket.
3. Employers’ Liability
If your company employs anyone other than yourself, you’ll need Employers’ Liability insurance. In fact, if you employ more than one employee, it’s a legal requirement to take out cover. Employers’ Liability insurance protects you against the cost of compensation as a result of employee injury or illness.
While a claim against you might be unlikely, especially if you have a close relationship with your employee(s), many agencies and clients will only consider your company if you’re sufficiently covered.
Where can you buy the right insurance?
The amount of cover required depends on your individual circumstances – the degree of risk can vary considerably depending on what it is that you offer and how it’s offered. But, it can be difficult to ascertain just how much cover you might need. Some insurers make contractors’ lives easier by offering packages that come with comprehensive cover as standard.
Specialist contractor insurance provider Kingsbridge combine Public Indemnity, Public Liability and Employers’ Liability cover into one single policy. This policy also comes with Occupational Personal Accident cover as standard, plus Directors’ and Officers’ Liability insurance.
To find out more about Kingbridge, click here.
This blog has been prepared by Intouch Accounting. While we have made every attempt to ensure that the information contained in this blog has been obtained from reliable sources, Intouch is not responsible for any errors or omissions, or for the results obtained from the use of this information. This blog should not be used as a substitute for consultation with professional accounting advisers. If you have any specific queries, please contact Intouch Accounting.