Updated 10 September 2020
When you’re a contractor, it’s all about aiming to meet and hopefully exceed your client’s expectations. But even for the best contractors, accidents happen. When they do, having the right insurance in place can help you maintain the reputation, relationships and business you’ve worked so hard to build.
Let’s explore contractor insurance in more detail.
Typically, as a contractor you will work alone and handle your own business, often as a limited company of one person. This means you won’t usually enjoy the same perks as employees, such as receiving life, disability or accident cover. Should something in your workplace go wrong, the responsibility and costs fall entirely on you.
It’s also common for clients to request that contractors have certain types of insurance (like professional indemnity insurance) in place before doing business. This is to safeguard both you and them from financial loss in the event of an incident.
Unlike many insurance products, there is no specific ‘contractor insurance’ product that’s packaged and ready to buy. Instead, it’s more of an umbrella term used to cover any type of business insurance used by a contractor. You need to build your own policy, combining other insurance policies to create the level of cover you need for your work.
Contractor insurance can be made up of any of the following. The first three are the most common:
With so many products to choose from, it can be hard to know exactly which policy to go for. Every contractor and every industry is different.
For this reason, some insurance providers offer specialised insurance bundles for contractors, based on their industry. This includes offshore contractor insurance for the energy, oil and gas sector, IT contractors insurance, or Contractors’ All Risks Insurance for those in construction. The idea behind these packages is to take some of your homework away, prescribing what your industry is likely to need.
The products and level of cover you need depend on you, your industry, your turnover and the type of clients you have. For example, you won’t need employers’ liability insurance if you have no employees. You might want professional indemnity insurance if you offer professional advice, but the level of cover depends on your clients’ circumstances. For example, how much could they lose if you made a serious mistake?
Similarly, the cost of your policy depends on the insurance products you choose and how much cover you take out on each of them.
There are insurers dedicated to providing bespoke contractor insurance. It’s worth visiting their websites to see what products they offer, and to get an idea of their prices. Often, they’ll give you a discount for getting a number of policies through them.
Designing an insurance policy for yourself as a contractor isn’t always a clear-cut procedure. It can feel overwhelming to know what to include, especially since your scope changes with each new project and client. An independent financial adviser (IFA) can work with you to build the best protection package. They’ll assess your clients, industry and risk level, ensuring you buy the right products at a price you can afford.
The main purpose of contractor insurance is to protect you and your business from suffering financially in the event of legal claims laid against your work. However, there are things you can do at the onset of each project to minimise the risk of this happening in the first place.
The most important thing is to set expectations, communicate regularly and ensure everyone is on the same page. You can do this by:
Read more tips on working as a contractor.
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