Contractor Insurance

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:

• Cyber insurance
• Accident insurance
• Income protection insurance
• Gadget insurance

Not always. In fact, 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.

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

1. To win 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.

2. For 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.

3. To support outside IR35 status

Holding contractor insurance helps to show that you are a legitimate business and could prove key in safeguarding your outside IR35 status. This has become even more important following the introduction of IR35 reform in the private sector, which means medium and large businesses are responsible for determining IR35 status. 

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.

Again, this depends on the policy and the level of cover you require for your business. But here at CBW, contractor insurance policies offered by our partners start at just £2.92 a 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 launched by HMRC.

Better still, it’s likely that you can spread out the cost of a policy by making monthly payments, should you prefer.