Contractors and consultants provide professional advice and services to clients and as such, might well be liable for any mistakes or errors they may make in the course of their duties.
As a result, contractors should take out insurance cover just in case something goes wrong. In many cases, clients will insist that a contractor is covered by a professional indemnity policy before hiring them.
Contractor insurance quotes are very competitive these days – you can get an instant online quote for a variety of policies with a wide range of business insurance providers.
Professional indemnity (PI) cover
This covers contractors against claims for negligence, unintentional breaches of intellectual property, loss of data or documents, and claims for dishonesty.
In many cases, an end-client will insist that the contractor has a sufficient level of PI cover in place, as a condition of the contract.
Clearly, the risks a contractor faces will depend on their area of expertise (i.e. are they an IT contractor, a Management Consultant, etc).
Typically, specialist insurers will provide PI policies tailor-made to the area you specialise in. Read about the specifics in; ByteStart’s Guide to Professional Indemnity Insurance – What You Need to Know Before Buying Cover.
Employers’ liability cover
This type of policy will cover any ’employees’ you may have within your company for any injury sustained at work. Employers are obliged to carry this type of cover by law.
Even if you are the sole ’employee’ of your limited company, you still should take out employers’ liability insurance. The legal minimum level of cover is £5 million, but many insurers provide £10 million as standard.
There are a few very specific instances where your business may be exempt from the legal requirement to have an employers liability insurance policy in place. To find out more read our guide, What is employers liability insurance, and is my business legally required to have cover?
Public liability cover
This type of cover is also known as ‘general’ liability insurance and will cover your company against third-party claims.
An example of such a claim would be if someone visits your office and falls over a computer cable. It will also cover you if you accidentally damage property at a client site.
Read our dedicated Guide to Public Liability Insurance for more details and advice.
Tax investigation cover (aka IR35 Insurance)
This type of policy will protect your business in the event of an HMRC compliance investigation. Although HMRC might raise an enquiry into any aspect of your business, such as VAT or Corporation Tax, the main area of concern for limited company contractors is IR35.
The IR35 tax rules are aimed at ‘disguised employment’ – so if you are working via your own company, but in reality, are just an employee in all but name, you may face a large tax bill.
IR35 insurance will cover the costs of professional representation – to defend your company. You may also want to protect your company against any additional tax and penalties you subsequently have to pay.
Read our dedicated guide to IR35 (tax investigation) insurance for further details.
Other types of business insurance
ByteStart has a series of practical guides to help you get to grips with the various types of business insurance, including;
- Which types of insurance must your business have?
- What is public liability insurance? – A guide for businesses
- What is employers liability insurance, and is my business legally required to have cover?
- A Concise guide to Directors’ and Officers’ insurance
Last updated - 11th September, 2020