Insurance is paramount for contractors, covering you against legal costs, unexpected damage and even cyber attacks. There are several kinds of contractor insurance available, so it’s a smart move to get familiar before choosing the right one for you.
That’s where Umbrella Broker can help, with our review of the different types of cover available to contractors…
Public liability insurance
There are two kinds of liability insurance available for contractors. The first is public liability insurance, which covers any risk to the public and the resulting claims. This could be anything from your postman slipping when delivering to your site, falling debris from scaffolding causing injury or just somebody tripping over a loose cable while passing.
It also includes your clients when they visit your premises, as well as any damage that may be caused by you or your employees when visiting a client’s site. Let’s say you knock over something expensive while you’re there – they won’t think twice about claiming for that damage.
In short, public liability insurance is essential for anyone who deals with customers or clients face to face. The cost will depend on a number of factors, such as:
- Your industry
- How many employees and clients you have
- Your location
- Previous claims
Employers’ liability insurance
The other type of cover is employers’ liability insurance, which is a legal requirement for contractors with one or more employees. Here’s the difference: employers’ liability insurance protects you against costs from compensation should employees become injured or unwell from work.
As soon as you take on any employees, you need to be covered for at least £5 million by employers’ liability insurance. Insurance must be provided by an authorised insurer and it includes any casual workers or short-term contracts. Fail to do so and you could face a fine of up to £2,500 per uninsured day.
Professional indemnity insurance
With professional indemnity insurance, you’re protected from any claims against your services, products or advice. So, if a client claims that your work is substandard or incomplete, your insurance will cover the cost of the legal defence and any expenses as well as any compensation should they succeed in claiming against you.
Professional indemnity insurance is required for several professions – such as management consultancy, business consultancy and IT contractors – in order to secure contracts. Basically, clients want to know you’re covered, so they know they’re covered too.
Even if you’re not legally obliged to take out professional indemnity insurance, it’s always better to be safe than sorry. Legal fees and compensation can stack up and cost thousands just for one claim. They can be crippling if you have to fork out yourself, while the cost of insurance is completely manageable.
Personal accident insurance
As a contractor, there’s no sick pay to tide you by if a serious injury stops you working. Instead, you’ll be short of money or reliant on your own savings. That’s where personal accident insurance comes in. When you’re covered by personal accident insurance, you will receive an ongoing payment to cover the loss in profits while you’re out of work, or a lump sum if you suffer a permanent disability.
Personal accident insurance can also be taken out for key employees. Again, if one of your employees is injured, it’s you that will need to cover their wage or sick pay. Statutory Sick Pay is £92.05 per week for up to 28 weeks and can no longer be reclaimed from the government. That’s over £350 per month, which could cause serious problems for some contractors if they need to cover it themselves.
As well as temporary injuries, personal accident insurance can be taken out to cover death. A lump sum will be paid out for people who are covered by the policy. This could help relatives of the contractor, or the contractor themselves if one of their employees can no longer work.
Contents insurance
Insurance for your office contents protects you in case any office equipment or furniture is lost, stolen or damaged. This could be computers and office phones, furniture like desks and chairs or even important documents that are stored on your premises.
You can even insure portable items, which aren’t stored permanently in your office. Fortunately, with the right flexible policy, you can get insurance for remote working too – so yourself or any employees will be insured when working at home.
Buildings insurance
Buildings insurance is useful for contractors who own their office. Unlike contents insurance, it covers fire and water damage to the office itself. Without it, a fire or leak could set you back thousands. However, it’s important to have contents insurance alongside buildings insurance, as no contents are covered by the latter.
Cyber insurance
Most contractors are reliant on digital tools in some way or another – whether it’s for communication, payment or just data storage. Needless to say, any data breaches, hacks or information loss can set you back and cost you big. That’s where cyber insurance comes in.
Also known as cyber risk insurance, it covers you for the recovery process after any cyber damage or loss. This could include investigating what went wrong, notifying and compensating clients, and reimbursing monetary losses.
Which type is right for you?
Contractors’ insurance isn’t a case of “either-or”. Instead, it’s about deciding where the risk lies and which plans are required to cover you. Professional Indemnity and Public Liability are the two most common insurance types held by contractors – in addition to Employers’ Liability insurance because it’s required by law.
However, Professional Indemnity insurance is required by some regulators and essential for members of some professional bodies. Because of this, both Professional Indemnity and Employers’ Liability insurance are provided as standard by umbrella companies.
The other types of insurance – such as cover for contents, cyber attacks or personal accidents – are optional, but will provide that extra peace of mind.
Make things easier
If you’re looking for peace of mind with contracting work, Umbrella Broker can help. We help contractors find the right umbrella company and accountant, so there’s no need to worry about payroll and taxes.
Need more information? Feel free to contact us today.
