What insurance do contractors need?
As a self-employed worker, making sure you have the right level of insurance to protect your business is vital.
When you take on a job for a client as a contractor in any capacity, be it as a business analyst, engeering consultant or software developer, it's important to have cover in place to help protect you if something goes wrong.
Insurance for contractors is an efficient and safe way to protect your reputation. It also helps to make sure that you meet the professional and legal standards of an employer, while covering your back should you make any mistakes that could cost your client financially.
Recommended types of cover for contractors
There are a few different types of cover that contractors should consider to protect themselves. Importantly, many employers legally require that you have the correct insurance before accepting a contract and officially starting work on a role or project. Below we’ll cover the most important types of insurance for contractors.
Protecting your reputation
Professional indemnity insurance helps protect your business if someone makes a claim against you for making a mistake in a piece of work. Essentially, it covers the cost of defending your business should you be accused of professional negligence and helps uphold your professional reputation.
A claim from a client could be the result of negligence advice from you. This could be from a recommendation you made which resulted in them experiencing a financial loss.
Co-workers and clients
Public liability insurance is vital to protect third parties, such as clients. As a contractor, you’ll probably spend a lot of time visiting client premises, which can leave you vulnerable should someone have an accident or injury as a result of the work you’re doing.
Claims can be made for almost anything, from a spilled drink on the floor which causes someone to slip, to accidentally damaging their computer equipment. It’s necessary to cover yourself in the event of a simple mistake happening that could lead to a costly claim.
Safeguarding sensitive data
Cyber insurance is becoming more important for contractors every day. When you store personal data about your clients and projects on computers or the cloud, you’re vulnerable to threats from cyber-attacks and data risks.
Safeguarding sensitive data is vital to protect you in the event of a cyber-attack. A data breach that exposes client data or otherwise prevents you from working could be very costly for your business. Cyber insurance covers you for the costs of restoring data and recovering equipment, or in a worst-case scenario, paying a ransom for the recovery of data without loss.
Other types of cover to consider
There are a few other types of insurance contractors should consider getting. Each depends on your personal circumstances:
- Office insurance – it‘s worth taking out office insurance to cover your workplace contents and computer equipment. This covers you against loss of income or trading equipment.
- Legal expenses insurance – legal expenses insurance could prove valuable as it covers the costs involved with contract disputes, tax investigations, jury service attendance and more.
- Employers' liability insurance – taking out employers' liability insurance is key if you have employees. It covers you for injury and/or illness claims made by employees while working for you.
Do contractors need employers liability insurance?
Employers' liability insurance is only required if you hire employees to work for you. If you carry out all your work as a sole trader, there’s no need to take it out, unless you are contractually obliged to.
Should you want to grow your business in the future and take on employees, this is something you will need to look into.
More information
For more helpful information for contractors, take a look at these articles.