Contractor Insurance: You Should Be Covered When Contracting
The huge differences between being employed and running a contracting business are very clear when it comes to insurance
. As an employee, you don't think about what happens if your office building is robbed and computers are stolen. And if you make a mistake at work you could get a telling off or even a harsh warning from your boss. But you don't get sued.And if the worst happens, like someone is seriously injured at work or the business comes to a halt because of a flood or industrial action, as an employee you're just interested in the monthly salary into the bank account at the end of every month.
But if you are a contractor, you are running a business and the buck stops with you. If your home office is burgled and your laptop is stolen, or even if you get your mobile stolen in a client's office, you have to replace it. Should you make major errors in your project work that costs your client time and money, then they could well come after you and your limited company for heavy damages.
That's why you need contractor insurance. Most limited company contractors have three main types of insurance policy:
- Office
- Professional indemnity
- Tax investigation.
Office insurance is a catch-all policy that covers the essentials, like public liability and employee liability, both of which are legal requirements for limited companies. Home office contents and portable equipment cover is for business kit like laptops, mobiles and tools.
Some policies also include: cover for business interruption, if something like a fire or flood keeps you from your workplace; legal expenses; and buildings cover if you own commercial property. Policies range in price from hundreds of pounds to several thousand per year.
Professional indemnity provides you with expert legal advice and the cash to settle if a client sues you for not completing work according to specification, especially where your failure costs the client money, or reputation damage. PI, as it is called, can cost anything upwards of several hundred pounds, depending on the level of cover required. Most large public and private sector clients insist on at least ٟm in PI cover.
Tax investigation insurance helps pay for accountants or experts in areas of the law like IR35, to defend you if you are investigated by HMRC. Cover sometimes comes as membership of trade and professional bodies. To take out cover separately costs as little as a few hundred pounds a year; usually more if you want to use your own choice of accountant or expert to represent you.
Contractor insurance policies are taken out by your company. Some insurances are required by law, others as a condition of service by the client and some are taken out by contractors just for peace of mind. But the day you fail or forget to take out or renew an important insurance policy is the day you'll probably need it.
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