The Insurance for Contractors Guide
Unfortunately, going it alone as a contractor isn’t just about freedom, escaping office politics, choosing your own jobs and being your own boss. With all of that freedom also comes the requirement to take care of your own admin and to put in place the protections your business needs. Now that you are out there on your own you no longer have the securities and protections that come with full-time employment for a large company and the benefits that go with it. In full-time employment if something goes wrong you are covered; if you need time off work you are covered; and if someone decided to sue the company, you are covered. But what happens when you work for yourself? What do you do if disaster strikes and your expensive, essential equipment is stolen? What about if your office gets flooded or a client decides to try their luck with a lawsuit? Any of these things could leave you thousands of pounds out of pocket with your business hanging by a thread!
That’s why it is essential that all contractors make it a priority to check out all of the different types of insurance on the market and see which ones are right for them. This will include the three main general insurances (discussed below) as well as many of the industry specific types that are available to contractors in different industries.
This article will offer you a brief guide to the most common types of insurance available to contractors on the market at the moment:
What Kinds Of Contracting Insurance Should I Be Considering Then?
When it comes to contracting insurance there are three main insurance policies that every contractor should think about investing in and a number of smaller policies that will be of interest to contractors depending on the type of contracting they do and the equipment they carry. The three main insurances are professional indemnity insurance, public liability insurance and employers liability insurance. Other, more specific insurance policies include Cyber & Data Insurance, Personal Accident Insurance, IR35 insurance and Office Insurance.
Here are the different policy types in more detail:
Public Liability Insurance For Contractors.
Public liability insurance protects you and your contracting business from any mishaps that might occur that involve a member of the public or their property getting injured or damaged in any way because of your business. Basically, if you as a contractor are public facing in any way, shape or form then you will need to think about public liability. Whether you have clients who usually come to your place of business (an office or home – office) or whether you simply go to their place of business, it is still worth thinking about. As an example, say you have a contract to go out and work on site for someone or to go and work in their offices and then an accident occurs which involves you; in either case, you might be liable. Public liability insurance will cover you for anything arising from that accident, whether it be medical bills, equipment replacement, lawsuits, legal fees or compensation. Examples of things that would be covered include accidentally flooding or starting a fire in a building, breaking some of their valuable office equipment or somehow injuring a passer-by or colleague. You can normally buy public liability insurance as a stand-alone policy although most people will tend to buy it as part of a combined deal with professional indemnity insurance.
Professional Indemnity Insurance For Contractors.
The second insurance that everyone should give serious thought to is professional indemnity insurance. Anyone who has a contracting business that involves giving advice or providing a professional service to clients will need to seriously consider getting themselves some professional indemnity insurance. It doesn’t matter how good you are at your job, there is always a chance that your advice or your service could lead to something negative happening to your clients or their money. If your contracting business involves giving advice to financial advisors, accountants or lawyers for example, then if that advice leads to them experiencing a financial loss they may decide to take action. Similarly, if your contracting is offering a service, like that of a chiropodist or dentist and your service causes a misdiagnosis of something, then you could also be sued. Professional indemnity insurance covers you against this kind of action and includes claims for defamation, intellectual property infringement, negligence and breach of confidence. What is also worth bearing in mind is that many policy providers will also let you take out a policy which covers you retrospectively which means you will not only be covered for work you are about to do, but for any work you have done in the past too.
When weighing up whether to opt for professional indemnity insurance there are certain factors you absolutely must consider. Firstly, consider how big your client’s firms are and the size of the contracts you are generally working. Then ask yourself if any of them might require professional indemnity insurance as part of the contract – most big firms and agencies do these days. Thirdly, think about how much you would need to raise in legal fees alone if you had to go to court over any of these issues and lastly, consider how much you could potentially face in compensation fees under any of those worst case scenarios. Chances are the numbers are so large as to be prohibitive and make professional indemnity insurance a no-brainer!
Employers Liability Insurance For Contractors.
This one is only worth thinking about if you have employees, but if you do have employees you have no choice – you are required by law to get employers liability insurance. In the UK it is a legal requirement for businesses with employees to have at least £5 million of employers liability cover. This cover protects you, your business and your employees against any compensation issues that might arise if one of your employees takes you to court because they believe they have been injured or become ill whilst working for you. Employers liability insurance covers you, your employees and any other staff you might have, including independent contractors and even volunteers.
Office Insurance For Contractors.
Office insurance is for contractors who have a place of work or home office and who want to protect it from various possible accidents and issues. Normally this type of insurance is best suited to those contractors whose work involves the use of expensive equipment or computers and who need to insure both equipment that they take on the road with them and equipment that is stored at the office. They also will want to insure the buildings themselves and to make sure they have a good contents policy that will cover their laptops, computers, printers, cameras and any other important kit. A good contents policy will cover against fire and theft, accidents and vandalism and will also guarantee prompt replacement or reimbursement so that the loss of any equipment doesn’t hinder your work for too long.
Business Interruption Insurance For Contractors.
Similarly, when it comes to loss of work due to unforeseen circumstances there are actually insurance policies that can help in a more general way. The most common risk involved with being a contractor (as opposed to working for a big company) is that there might be times that circumstances conspire against you and keep you out of work. Unfortunately if you work for yourself and you don’t work, you don’t get paid! However, if you cant work through no fault of your own, perhaps because you are ill or because your equipment has been stolen or because you are facing a lawsuit, then business interruption insurance can cover you for the losses you might incur and making sure you don’t lose any income whilst out of work.
Cyber and Data Insurance For IT Contractors.
Particularly suited to IT contractors, cyber and data insurance is there to protect workers who hold a lot of important information on their computers, either for themselves or on behalf of their clients. This insurance will cover you against issues like data breaches or against any malicious hacking attacks that might cause damage to your systems or the systems of your clients. It will cover the cost of fixing any unwanted attacks, of restoring systems and even the cost of reputation management, should it be necessary.
Personal Accident Cover For Contractors.
As with regular household accident policies, this insurance covers you against any accidents that might happen and which might prevent you from doing your contracting work. Should this happen, the insurance policy will pay out a weekly sum until you are back on your feet. In the case of death or permanent disability this type of policy will also pay out a large sum to your business.