With running a company comes a great deal of responsibility, and a number of potential misfortunes. Although many contractors will go through their career without ever needing to use their insurance policies, with the usual grumbles about that attached, the possible disasters to a company are ever present. Luckily, the endless insurance companies have come up with their solutions and you can get insured for pretty much anything nowadays, including your fantasy sports team, alien abduction and death by ghost (according to Forbes).
Whether you wish to protect yourself against an impromptu trip into outer space or not, there are some insurance policies which are commonly stipulated as a contractual requirement and others which are just plain good business sense:
Professional Indemnity

In many industries where knowledge is money, such as law, architecture and accountancy, Professional Indemnity is largely required, as the advice provided by consultants can cost a lot of money to the client if it is wrong. However, it is fast becoming commonplace in many other trades, often due to being included in standardised contracts and the understanding that any contractor is providing some sort of advice, one way or another.

This policy covers your company in the event that your client should allege that you or an employee have caused them a financial loss through negligence or dishonesty. It is an important insurance policy as it not only protects your business, remember your client only has to allege that you have made a mistake, but also has benefits with regards to the IR35 legislation, as it is a sign that you are a genuine business with the potential for errors which would need to be rectified at your expense (an employee would not have to pay for damages as their employer should have the relative insurance to deal with their employees mistakes).
Public Liability
One of the most common insurance policies for business owners, including sole traders, this insurance will cover for the death or injury of a third party or damage to third party property by yourself or an employee. Many office workers will see this policy as unnecessary due to their working conditions, however it is often contractually required in order for the client to ensure their property and staff are protected in the event of some misfortune. Contractors working in more manual trades such as oil and gas contractors, will almost always be required to hold good public liability policies at all times.
Employers Liability

This policy is often combined with Public Liability as it also covers death or injury but to one of your employees during service. It is a legal requirement to hold this insurance if there are any employees in the business (no matter if they are part time or a relative) other than the principal director. Many standardised contracts will stipulate this insurance policy combined with Public Liability as a requirement before commencing work, however you may be able to get it removed should you not have any employees. If not, don’t worry, policies are inexpensive and widely available.
Tax Insurance
With the concern of the IR35 legislation ever present, some insurance companies now offer policies to help in the event of an investigation, not only with IR35 but any HMRC enquiry. These policies usually include representation in the event of an enquiry and will handle the case from the onset. There are a number of suppliers so ensure you do your research, fully understand the terms and conditions, know where the representation would come from if you needed to claim and their level of experience.
Tax loss insurance is also available which covers for liabilities should you eventually be caught by the IR35 legislation (limits vary) and these generally include the investigation cover as well.
Medical/Life Insurance
As part of your financial planning as a contractor, you may wish to consider additional insurances. One of the most common of these is medical insurance. Unlike employees who have the backing of their employer should they fall sick, contractors must manage on their own, so if yourself or a member of the family fell seriously ill or were injured which put you out of work for a period of time, you may find yourself having financial troubles. Medical insurance will often cover the cost of treatments (covered conditions can vary greatly between providers) and provide private care which can get you or your family member back on your feet and back to work faster, reducing the financial burden of an illness or disablement.

Life insurance is also worth consideration. Most employers these days have a death benefit for family members should one of their employees pass away. Contractors do not receive these kinds of benefits, so if you wish to provide some protection for your family in the event that the inconceivable should happen, you will need to take out the relative insurance policy. There are different types of life insurances, with the main options being debt cover, where the policy will take care of large debts such as a mortgage, and family cover, where a sum of money will be left behind for your family. Generally policies are set up to pay out if it happened during a fixed term but it is also possible to get a ‘whole-of-life’ policy which will cover whenever you die, and it is certain you will at some point unless medical advancements make a revolutionary breakthrough in immortality, but these are considerably more expensive as a result.
Additional Insurance Policies
There are a number of different insurance policies which a contractor can make use of to protect themselves and their businesses. Some others worth considering are:
- Legal expenses insurance – there are a number of options for legal expenses policies which cover in the event of unexpected legal disputes, such as contractual disagreements.
- Gadget insurance – you may wish to protect your laptop, phone or other gadgets required for you to fulfil your work.
- Office insurance – should you work from an office, it is important to take out building and contents cover. Some policies may include public liability insurance.
- Travel insurance – if you travel abroad frequently for work, you may wish to consider an annual travel insurance policy which covers business travel. This can generally be made as an addition to a vacations policy.
- Business interruption insurance – some may wish to consider this income replacement insurance which covers if a disaster, such as flooding, should cause you to cease trading for a period of time.
There are a number of insurance brokers offering insurance policies for relatively small premiums and instant cover, but whenever choosing insurance, make sure you ask yourself these simple questions:
- Do I need this insurance? Is it stipulated in your contract or legally required?
- Is there a real possibility of needing to claim? If you don’t have an office, then business interruption cover or office insurance is surely not going to be right for you.
- What is important to me in my insurance provider? Do you just want the cheapest option, do you want an experienced company, good customer service, somewhere where you can get all your policies in one place or the ability to cancel at any time? Knowing your priorities and what you want in your broker first will make your policy search go a lot smoother.
- Is this the right policy for me? Fully check and ensure you understand what the policy covers and its caveats and exclusions. A policy which doesn’t cover what you need is money down the drain and possibly an unpleasant surprise.
- Do other providers have a better deal? Not all policies are the same, so don’t just settle for the first one, check at least 5 different providers to ensure you get a well-suited policy for you and your business. Don’t forget to look at reviews and other contractor’s recommendations. Others experiences can be invaluable.
If you take the time to find the right policies and right insurance provider for your business at the start, you may never need to search again. However, don’t forget that changes in your business, your current provider or the insurance market in general may mean reviewing your insurance needs.
You can find more information on contractor insurances here.
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