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Finding the Right Contractor Insurance

Those who are new to contracting must consider a number of factors to enable their company to succeed and not fall at any pitfalls that face modern contractors. New contractors need to study and seriously consider the correct insurance in order to work through their limited companies.

Contractor Insurance

Contractor insurance is small business insurance designed specifically with contractors and self-employed professionals in mind. The policies range from a number of different products, covering a large array of outcomes and indemnities. There are some insurances that are industry specific (cover for Oil & Gas workers for example) and others that only apply to a minority of those within the contracting profession.

Professional Indemnity Insurance

Professional Indemnity Insurance, often referred to as PI insurance, is an essential form of small business insurance. The policy is known throughout the industry as the principal form of contractor protection and greatly benefits those working through limited companies.

The Benefits of PI Insurance

To describe the benefits of PI insurance, it must first be looked at in perspective. When working as a full time and permanent employee, if a worker was to make an error delivering their employers services to a client, the employee would of course not be personally liable for the allegations of the error, and would not be responsible for the inevitable costs that would exist if the client chose to sue the employer for damages.

Basically, in the case of an employee being the cause of a claim being made against the company, the company itself would have to ‘foot the bill’. The company would deal with the consequences of the employee’s actions as opposed to the employee being held liable for millions of pounds in claims.

This scenario would play out considerably different if occurring to a contractor. This is because, if an error was made by a contractor that results in a claim of negligence being made, the limited company the contractor works for is liable, and as the contractor is both the director and shareholder of the company, the contractor is therefore fully liable, resulting in serious financial loss.

Professional Indemnity Insurance is designed for circumstances when contractors are faced with claims of negligence being made against them. Because of the risks involved with being a one man limited company (no insurance umbrella provided by an employer) PI Insurance is vital and should never be overlooked by any contractor.

Different PII Policies

Policy prices vary when calculating risk by considering a number of factors:

  • The level of cover required
  • The annual turnover, or forecast turnover, of a limited company
  • The type of work the contractor does

By Troy Stevens

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