subject: Contractors Need The Right Insurance [print this page] Contractors are business professionals working via their own limited companies, and as a result of this fact, require secure insurance. Because they work via a contract basis, contractors are not classed as employees, therefore are not covered by any larger company insurance umbrella, leaving them arguably vulnerable to financial insecurity. Contractor insurance is essential to self-employed individuals due to their professional position as one man companies leaving them financially liable to any mistakes, errors or absence.
In spite of this, some freelancers underestimate the sorts of risks that they are exposing themselves to when refusing to have the appropriate policies. Insurance for contractors is vital, and it is well worth understanding its importance to be correctly covered.
It may not seem that contractors are in professions full of risks, but contractors often have a lot of responsibility, and can incur huge financial losses due to negligence and accidental mistakes they make whilst at work. Also, being one man limited companies and not under any insurance umbrella that a full employee may be under, contractors are not paid for sick leave or accident cover, leaving them financially vulnerable in these cases. Basically, if a contractor has an accident, makes a mistake or causes a problem, they are on their own.
There are numerous types of contractor insurances, and all of which serve a specific and effective purpose that is designed explicitly with contractors in mind. There are policies available which keep contractors covered for negligence, breach of duty, neglectful misrepresentation, sickness and also retrospective cover is available on certain policies covering work done in the past. The cost of defending claims far exceeds the cost of the insurance, thus providing value for money and also peace of mind for any contractor.
The benefits of contractor insurance are vast, and all UK professionals working via limited companies should be well aware and well covered when it comes to professional protection.
Not only does contractor insurance aid a contractor financially, but it also helps in an IR35 perspective. It works as a means of helping prove that a contractor is legitimately self-employed, very useful when HMRC are looking into employment status. Tax Liability Cover (TLC35), specifically, is a useful insurance policy to have in place as a freelancer; it protects in the event of an IR35 enquiry, a PAYE compliance review, or a VAT dispute.
Despite the risks increasing for contractors, many specialists do not have Insurance in place, even though claims against them have amplified hugely within recent years. As a result of this, many contractors and companies are required to purchase Insurance before they sign a contract with a client, allowing them to be covered for any liabilities that can arise from either the services that they have provided or advice that they have given. These contractually required insurances can range to two or more policies depending on the risk factor or length of a contract.
by: Chris Carvill
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