What is Contractor Insurance and do you need it?

There are many advantages of being self-employed and working as a contractor or freelancer. Flexibility, freedom, independence, a good work/life balance and a high rate of pay are just a few of them. But on the flipside, contractors also face a degree of risk.

As a self-employed contractor you effectively work alone and don’t have the protection of an employer should anything go wrong. This means the responsibility to rectify the situation should a claim be made against you, including covering potential compensation and legal costs, is yours.

You also don’t receive employment benefits such as statutory sick pay should you be unable to work through illness or injury. And due to the nature of project-based work, if you’re not working you’re not earning.

Contractors should therefore be sure to have adequate Contractor Insurance cover in place to provide protection for their business, income, family and any employees against financial loss should unforeseen circumstances transpire that results in legal action being taken against you, or if you’re unable to work through illness or injury.

In this post we’ll break down what Contractor Insurance is, the main types of Contractor Insurance and how they can protect you, as well as the key benefits of this cover and tips on choosing the right policy and cover for your needs.

What is Contractor Insurance?

Contractor Insurance is a group of insurance policies that are designed to provide protection for self-employed contractors and freelancers against potential liabilities and risks regarding their work, including legal action or being unable to work due to illness or injury.

What Types of Contractor Insurance are there?

There are various types of Contractor Insurance available. The cover you require depends on factors such as the nature of your work and whether you have any employees. In most cases several different types of Contractor Insurance have to be combined to provide an adequate level of protection.

Professional Indemnity Insurance

Professional Indemnity Insurance gives protection for your business should a client take legal action against you for loss of income due to professional negligence, error or an omission in the service they’ve received from your business. The scope of this cover also includes infringement of intellectual property, libel & slander, data loss and breaches of confidentiality.

It will cover any costs incurred for compensation payable to your client if you are deemed to be liable and any legal costs incurred as a result of defending your case. Generally this type of cover is advisable for contractors that provide professional services or advice, such as IT contractors and consultants.

Public Liability Insurance

If a third party, such as a client, customer or member of the public, takes legal action against you due to an injury they have suffered or damage to their property due to actions undertaken by your business, Public Liability insurance will protect you. This includes covering compensation costs if you’re judged to be liable as well as the legal costs incurred as a result of defending yourself.

Public Liability insurance is a must for contractors that regularly have interactions with members of the public or their clients. Most self-employed people have public liability cover and it can be a prerequisite from clients for you to take on a contract with them.

Employers’ Liability Insurance

Employers’ Liability Insurance is required by law if your business has any employees or you employ subcontractors, or if someone is working under your direction and supervision.

It protects you should an employee take legal action against you due to an illness or a bodily injury sustained as a result of their employment with you.

Personal Accident Insurance

When you’re self-employed if you can’t work you don’t earn and unfortunately bills still have to be paid. Personal Accident Insurance mitigates this risk by providing you with a lump sum payment if you can’t work as a result of a serious bodily injury that prevents you from fulfilling your role.

The benefit is payable whether the injury happened whilst working or if it happened outside of work. The amount payable is dependent on how severe your injury is but this cover provides you a financial safety net so you can focus on recovery without financial worries.

Contractor Sickness Cover

Contractor Sickness Cover is similar to Personal Accident Insurance in that it pays out if you are unable to work due to bodily injury. Where it differs is that it also covers you if you can’t work due to disease or sickness, and Contractor Sickness Cover pays you a monthly benefit for a maximum of 12 months instead of a lump sum.

This monthly income provides financial breathing room so you can fully focus on recovery and getting back to what you do best.

Other Types of Contractor Insurance

The scope of Contractor Insurance is wide-ranging and various other types are available which may or may not be relevant to you depending on the nature of your work, your specific circumstances and the level of risk you’re prepared to face.

  • Jury Service and Legal Protection – Covers you for lost income if you’re called up for Jury service and covers your legal costs should legal action be taken against you
  • Business Equipment Cover – Protects your business-critical equipment that you need to fulfil your role against accidental damage, theft or loss
  • Business Travel Insurance – Business travel insurance provides protection when you travel for work covering things like ticket costs if your trip is cancelled and loss of your luggage
  • Tax Enquiry Insurance – Protects your business by covering legal fees incurred defending yourself should HMRC open a tax enquiry or dispute against you

What are the key Benefits of Contractor Insurance?

The benefits of protecting yourself with Contractor Insurance are wide-ranging. The obvious ones are financial in the sense that you are protected from losses should a claim be made against you, and your income is protected should you be unable to work.

This financial safety net provides peace of mind that protection is in place, not just for you and your business but for your family as well. This enables you to fully focus on your work without any additional worry.

Another Contractor Insurance benefit is the positive and professional image it presents to clients – and potential clients. It shows that you take your responsibilities seriously and clients will have the reassurance that protection is in place should unforeseen events happen. This makes it more likely that you’ll win repeat business and also work from new clients which can help your business grow.

Having any mandatory Contractor Insurance in place, such as Employers’ Liability if you have any employees, ensures that you won’t be hit with any penalties or fines.

Tips on Choosing Contractor Insurance

There’s no one-size-fits-all rule for choosing what Contractor Insurance you need. No two contracting businesses are the same and your unique circumstances and the nature of your business must be considered when deciding on Contractor Insurance cover. You might also need to combine several different policies to provide adequate protection.

Many factors should be taken into account including the nature of your industry and clients and the service, or services, that you offer. You should also establish what risks and potential liabilities you face.

You will then be in a position to ascertain which Contractor Insurance policies are relevant to you and start to investigate providers. Be sure to thoroughly review policy documentation so you fully understand what you are, and aren’t, covered for. Choosing the cheapest policy isn’t necessarily the best option as you need to be certain that adequate protection is in place.

It’s a good idea to seek professional advice from a Contractor Insurance broker such as Qdos. As long-standing and multi-award winning industry experts, Qdos makes Contractor Insurance simple. With over 30 years’ experience, Qdos are the go to Contractor Insurance experts. Qdos understand the challenges that contractors face and take a personal approach to Contractor Insurance with flexible, tailored solutions and a proven track record.

Visit Qdos today for a no-obligation Contractor Insurance quote and get the right cover at the right price. If you have any queries about Contractor Insurance or our accounting service please call us on 0330 024 0406 or request a call back today.