When starting out as a contractor or freelancer, there are a lot of new, big, scary decisions to make. Picking the right form of business insurance is a perfect example.
This applies to anyone who sets up as a limited company contractor, and our latest blog post outlines the three main categories of self-employed insurance to make things a little clearer (and less daunting).
Professional Indemnity Insurance
Although not legally required, this is the form of insurance you’re most likely to buy. This is because professional indemnity insurance protects you if a client experiences a financial loss due to negligence in advice/services you have provided.
This negligence is easier than you think, and can happen in the following ways:
- Your business loses documents or data.
- Your limited company inadvertently breaches confidentiality e.g. sharing confidential information without consent.
- There is unintentional copyright infringement e.g. some content will be copyright-protected and so cannot be used without permission.
- There is professional negligence or breach of duty of care (this could be a mistake or just plain poor advice).
- Your business publishes false statements that are damaging to either a person or company’s reputation.
Whether the accusation of negligence is true or not, defending yourself against such claims comes at a very high cost. Professional indemnity insurance keeps you covered, helping you pay for compensation claims and legal fees.
Public Liability
Again, this type of insurance is not legally required – but it is useful. Public Liability protects you if a customer or member of the public is injured or experiences some sort of loss due to your work. It is wise to buy public liability insurance if any of the following apply:
- Customers visit your premises.
- You work on client sites e.g. tradesmen who carry out work in homes.
- You work in public e.g. your work could cause damage/injury to someone in a public area.
Public liability covers you for compensation payments, repairs or replacement costs, as well as medical fees and legal expenses.
Employers Liability
This type of insurance is legally required. However, only those with employees need to pay it. Contractors who run their limited company alone, for example, would not purchase employers liability insurance, but if there is more than one worker in any capacity, taking out one of these policies is a legal requirement.
If any current or former employee claims they developed an illness or injury whilst working for your company, employers liability covers compensation claim costs and legal fees. If you do not have this insurance in place, you could be asked to pay a £2,500 fine for each day you do not have it.
Summing up
The cost of these three main insurance policies depends on a variety of factors, including risk factor of your business/industry and level of cover.
In any case, not having the appropriate insurance in place is risky, which is why we strongly advise all limited company contractors to purchase cover. Our team can point you in the direction of specialist brokers.
To find out more, get in touch with Bright Ideas today.
