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Contractor Insurance

Frequently Asked Questions About Insurance for Contractors

The majority of limited company contractors hold at least one – if not more – contractor insurance policies. Whether it’s IR35 insurance, professional indemnity insurance or public liability insurance in this day and age there are a number of policies available to protect you, as a contractor, when running your own business.

But how do you know which insurance you might need? Should you take out PI insurance, tax liability insurance, public liability cover or all of the above? And anyway, is insurance as a contractor even a legal requirement?

Which Contractor Insurance Policies Should I Consider?

The most common contractor insurances held by individuals working through their own limited companies are: 

  • Professional indemnity insurance
  • Public liability insurance
  • Employers’ liability insurance
  • Legal expenses insurance (including tax investigation cover for IR35)

However, there are plenty of other policies that you may want to consider depending on your business, its industry, the services you provide and the peace of mind that you want. These include:

  • Portable equipment insurance
  • Directors’ and Officers’ insurance
  • Cyber insurance
  • Life insurance
  • Jury service cover
  • Income protection

Is Contractor Insurance a Legal Requirement?

The only business insurance required by law is employers’ liability insurance, should your business employ people – whether on a full-time or part-time basis.

However, given most contractors are both owners and employees of their own company, you aren’t obliged to take this policy out. That said, the moment you employ someone, you need to buy employers’ liability insurance, which will protect you against a claim made by an employee for allegations of illness or injury.

While the many other contractor insurance policies on the market aren’t a legal requirement, hundreds of thousands of contractors in the UK opt to protect their businesses. But why is this?

Let’s take a look…

Why Should you Buy Contractor Insurance?

  • To win more work. Most recruitment agencies and end-clients demand that contractors hold insurance as part of the contractual agreement. So if you don’t hold it, you’ll miss out on opportunities.
  • Peace of mind and vital protection. Even with the best will in the world, your business might be sued or investigated by HMRC. Without business insurance, your company will be left to pay for damages, tax liabilities and claims from its own pocket.
  • To demonstrate outside IR35 status. Holding contractor insurance helps to show that you are a legitimate business and could be important in safeguarding an outside IR35 status.

What Level of Cover do I Need?

The level of cover that you take out is likely to depend on your contract and nature of your business. However, most contractors hold professional indemnity insurance at £1m, public liability at £1m and employers’ liability at £10m. If you work through a recruitment agency, it’s probable that they will stipulate the minimum levels required contractually. Even so, you should always assess your own business risk.

 

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How much Does Contractor Insurance Cost?

Again, much of this depends on the policy and the level of cover you require for your business, but at Markel, contractor insurance policies begin at just £5 per month. The cost of contractor insurance can be significantly lower than the cost of legal fees, professional representation and any resulting claims made against you or, in the case of IR35, tax investigations. Better still, it’s likely that you can spread out the cost of a policy by making monthly payments, should you prefer. To find out specific prices for a range of insurance policies, please click here.

About Markel

Markel are an award-winning insurer with over 200,000 customers in the UK and are rated 4.8 out of 5 from 2,000+ customer reviews.

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