Insurance is all about preparing for the ‘what if?’ It is one of those intangible costs which seems expensive if you never need to claim, but a real back-pocket saver when disaster hits. I suppose that, if you get your insurance right, you should count yourself lucky either way.
Some of these insurances are optional; others may be required by law or written into the contract that you sign with your customer.
Insurances for contractors to consider
Depending on the type of business you are in and the way in which you work for and engage with you clients, you should think carefully about your insurance. Making the right decisions could save you money, both in the premiums you pay and in any subsequent payouts you might receive.
Professional Indemnity Insurance: OK, so no one is perfect which means that even the very best can make mistakes. If you have directly or indirectly, unintentionally or through negligence, caused cost to a third party, you could be liable. This insurance also covers you for verbal misdemeanours, breaches of confidentiality or loss of important information.
Public Liability Insurance: This is an occupational cover for Limited Company contractors. It covers you if, in the course of doing your work, you cause injury or damage to another person or their property. You are usually covered on your own property and at any other place of work with this cover.
Employer’s Liability Insurance: This is generally only necessary if you employ staff. However, you should check the details of your contract as they sometimes include this as a standard feature.
Occupational Personal Accident Insurance: This is an important one to think about, especially if you are the sole provider at home and have no other means of supporting your household. If you have an accident, while at work (including travelling to and from) which stops you from working and earning, this insurance will help to plug the gap. Most types of Occupational Personal Accident policies also include a lump sum payout for permanent serious injuries or death.
Directors’ and Officers’ Liability Insurance: If your business has been found guilty of breaking rules, falling foul of legislation or similar misconduct you, as a director, are responsible. This policy will cover your back and ensure that the ensuing costs are paid.
Legal Expenses Insurance: If you are fighting a legal case (employment tribunals, tax issues or if you are making claims against someone else) this insurance will cover your costs.
My final piece of advice when thinking about legal cover and insurance for your business is to take sound, independent advice first. And remember, you can never insure yourself after the event and accidents do sometimes happen: So you can’t afford to take too many chances and ignore this issue.
My IR35 top tip!
As an employee, you do not need to have professional indemnity insurance. Therefore, if you have got adequate cover for yourself as a contractor, you can use this to help demonstrate to HMRC that you are operating as a legitimate business.