‘Why do I need business insurance as a contractor?’ is a common question, specifically from contractors. While contracting brings many benefits, it also brings many risks. Whether you are contracting for the first time, or are a seasoned contractor, you must check that you hold the right coverage and your role is fully insured.
You purchase insurance in the hope that you don’t have to use it, but it’s essential that you have something in place. Would you ride a bike without a helmet? Would you jump out of a plane without a parachute? As a contractor I would ask myself a similar question, ‘Would I operate my business without holding the relevant insurance?’. Should the unforeseen happen, business insurance is your safety net.
Most agencies and clients now stipulate that contractors must hold adequate insurance before commencing work. It is best practice to check the terms and conditions of every contract as it’s highly likely there will be an insurance stipulation there.
What type of business insurance do I need? There are three main types to consider:
Professional Indemnity Insurance
Professional Indemnity Insurance protects you against any incorrect or inadequate advice and/or services that you provide. Contractors can produce work resulting in both financial and reputational loss for their client, sometimes only uncovered long after the contract was completed. In this instance, your company can be held responsible, and Professional Indemnity Insurance protects you.
Public Liability Insurance
Public Liability Insurance provides cover when a person is injured, or a property is damaged as a result of your actions. This insurance covers you at your home, business office and within the premises of the client you are working for. As the director of your own company, you have a duty to protect everyone that may be affected by your processes and procedures.
Employers Liability Insurance
Employers Liability Insurance is required by law to protect employees against any personal injury claims that occur as a result of employer negligence. As an employer, you are legally and morally responsible for the wellbeing and safety of your staff. This includes any injury or ill-health caused by the conditions of employment.
It is your responsibility as the director of your limited company to ensure you are protected against any of the risks involved. Holding the right insurance is a simple and sensible step towards covering you against any nasty surprises and leaving you to focus on running your company.