Breaking Down Contractor Insurance: What’s It All About?

Google reviews
April 20, 2018
n

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.

OH5IPV0

Resources

Recent Articles

Inheritance Tax at record levels, but Business Relief can help

Inheritance Tax at record levels, but Business Relief can help

Inheritance Tax (IHT) has reached a record level in the UK, with £7.5 billion flowing into Treasury coffers in 2023/24, up from £7.1 billion the previous tax year. One key reason for this growing tax take is rising property prices - the average house price in the UK...

Tipping Act Code of Practice to bring fairness to employees

Tipping Act Code of Practice to bring fairness to employees

Whenever you leave a tip in a restaurant or a hairdressing salon, for example, you would hope that the tip money you left will go directly to the person who provided you the service you are tipping for. But for many restaurants and other industries, that hasn’t always...

Everyone should check their tax code now

Everyone should check their tax code now

HMRC will provide new tax codes at the start of every new tax year if the Personal Allowance has changed, if someone has had a change of circumstances, including perhaps had a pay rise, and even to those who are taking their pensions for the first time. It’s important...

Ready to join us?

Whether you’re a contractor, freelancer, or small business, Bright Ideas can help remove the burden of time-consuming and complex finances. We’ll draw on our years of knowledge and experience earned helping sole traders just like you.

When you choose us, you’ll be assigned a dedicated Account Manager who’ll provide one-on-one support that’s customised to your business. Communication is key, so we’ll always answer your questions or requests as soon as we can. In fact, we offer a same-day response guarantee for emails and calls received before 3pm.

Contact us to get started

Give us a call us or send an email today!

Looking to switch accountants?
We make the transition simple.

Does your current accountant give 1-to-1 support? Are they fast and thorough?
Slap-dash services hold businesses back, so try our experts instead.

Move to an accountancy service that goes the extra mile…

Start the conversation

Let’s make your finances Brighter

Call us Monday to Friday 9am - 5pm

0161 669 4221

Request a call back