A handy guide to contractor insurance

If you’re just starting out in contracting, you’ll no doubt have a long checklist of things you need to do before you can reach out to clients. One of these tasks will be taking out quality insurance for your new Limited Company.

We understand that the world of insurance can feel like a minefield, so let us help! The Intouch team has put together this simple guide explaining the types of cover you’re likely to need – but first, that all-important question…

 

Why exactly do you need insurance?

Like any other business owner, contractors need to protect themselves against a number of risks. Arguably the main risk for contractors is a third-party claim against your business – for instance, if a client accuses you of negligence or damage to their property.

Without cover, a single claim could tarnish your reputation and cost you thousands of pounds to put right. It could very well spell the end to your small contracting business.

But also, you’ll find that having insurance is an essential requirement in the contracts you have with agencies and companies. A quality insurance policy will protect you against the unexpected and give you peace of mind with each new contract you take on.

 

The types of insurance you’ll need

Cover comes in all shapes and sizes – here are the types of insurance you’ll need in order to fully protect your Limited Company:

 

• Professional indemnity

If a client believes you’ve done something wrong in your work, known as ‘professional negligence,’ this cover will protect you against the financial implications of them claiming against your company. For instance, it will pay out legal defence costs and damages awarded to the client.

 

• Public liability

As the name implies, this cover is needed if you deal with the public – for example, if your clients visit your office or you work at their premises. It offers protection in the event someone is injured or property is damaged as a result of your work.

 

• Employer’s liability

This protects you against claims made by employees. As you don’t have any employees, you might be wondering why you need it? However, you’ll find that many agencies and clients require you to have employer’s liability cover, alongside public liability and professional indemnity insurance.

 

• Directors’ and officers’ liability

As the director of your own business, you could be held accountable for a number of legislative breaches involving things like mismanagement, health and safety failure or failing to comply with company law. This insurance will cover the financial costs of a claim to make sure it doesn’t take a hit on your bottom line.

 

• Occupational personal accident cover

If you’re injured while working and your business grinds to a halt, it’s almost certain that you’ll be at a financial loss. This insurance pays out a regular sum of money whilst you get better, so that your finances don’t add to your worries.

 

Secure insurance through Intouch

Intouch Accounting has partnered with reputable insurance provider Kingsbridge, which specialises in comprehensive contractor policies. To make things easier, Kingsbridge offers an insurance package which includes professional indemnity cover, as well as public and employer’s liability. You can also boost protection with directors’ and officers’ liability and personal accident cover.

And if you’d like support getting your business off the ground, find out more about Intouch’s services by calling one of our experts on 01202 375293.

 

 

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.

What insurance do you need as a contractor?

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.

 

Sickness and holiday pay – a permie perk or open to all?

Sickness and holiday pay

When contracting through your own Limited Company you’ll be aware that you’re not entitled to the same access to sickness and holiday pay as permanent employees are. So it’s up to your company to make provisions for your absences – planned or otherwise.

 

Louisa Drewett, Director of Accounting and Tax at Intouch Accounting, advises her clients; ‘to set aside at least 4 weeks out of their annual contractor take home pay to ensure they’ll have enough time for holidays, birthdays, potential sickness and general time off.’

 

As a contractor, you can claim up to £88.45 per week (up to a limit of 28 weeks) in Statutory Sick Pay (SSP) from your Limited Company if you have to take time off through illness. Remember that it’s your Limited Company that bears this cost and that it cannot be reclaimed from HMRC.

 

The SSP regulations are complicated but information is available online from HMRC or your accountant.

 

SSP will probably not even come close to what you’d expect to earn per week as a contractor, so you will need a backup plan…

 

Aim to keep a sum in reserve to tide you over in the event of sickness.

 

What about protection?

It’s also sensible to consider insurance:

 

  • Income protection insurance – pays an income if you’re unable to work due to illness or accident.
  • Critical illness cover – pays out a lump sum if you get one of the specific medical conditions or injuries listed in the policy.
  • Life insurance – pays your dependants money as a lump sum or as regular payments if you die.

 

When shopping around for insurance, remember that traditional insurance providers may not offer the cover you need. Your contractor accountant may also be able to offer some advice on who you should approach for a quote.

 

Holiday pay

As a contractor, you’re your own boss, so in theory you can plan and take holidays whenever you wish, but bear in mind that you won’t receive holiday pay. For your personal and professional health, it’s vital to get some downtime. If you take this between contracts when a natural break is expected, it will impact your income. You will be revitalised and less likely to have “slumps” where you lose motivation, which in turn impacts on your income.

 

Consider your finances; can you afford a break at the time you’re considering one and if so, for how long? Remember you’ve also got to pay for the holiday itself!

 

It’s prudent to squirrel away money throughout the year into a holiday fund.

 

Final thoughts

When it comes to holidays, cut your coat according to your cloth. It may have to be a weekend in Whitby rather than a fortnight in Florida (not that there’s anything wrong with Whitby), but you’ll benefit from the rest just the same.
Remember to ensure you pay your downtime and health the same level of attention as you do for your contracting career. One cannot exist without the other, so take care of both.

 

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.