If you are a contractor or a freelancer, you may not be aware that you should really have insurance. Working as a freelancer or contractor often gives you the freedom to work on a lot of different projects simultaneously. You may even be able to choose who you work for, where you work and what hours you complete the work.
However, have you ever considered what would happen if something were to go wrong? You may find yourself in trouble without the right contractor or freelance insurance, leaving you vulnerable. Furthermore, if you are not signed up with a UK Umbrella Company, you will have even less protection than you probably realise, so making sure you have the right insurance is crucial to protect you, your business and your assets.
Why do Contractors Need Insurance?
The majority of limited company contractors and freelancers will hold some kind of insurance, whether that be standard contractor insurance, professional indemnity or liability insurance. The precise policy will differ according to the type of work you are carrying out for your clients.
For example, a builder and a freelance writer will have different needs with regards to their insurance. As a contractor or freelance worker, you do not have the same stability or safety net that an employee of a company would; you do not have a guaranteed, regular salary either, so insurance is absolutely vital. Without it, you could be left to pay thousands of Pounds for repairs and other things that may need replacing to help your business function at all.
What Kinds of Policies Should You Consider?
The most common contractor insurance policies held by both freelancers and contractors are include:
- Professional Indemnity Insurance
- Public Liability Insurance
- Employers Liability Insurance
Broadly speaking, these policies will cover you against ‘classic’ cases of negligence in a variety of circumstances.
If you believe you will be in need of more detailed cover than these, you could start looking at policies such as Business Interruption, Jury Service Cover, Income Protection and Office Contents insurance policies. Contents insurance may be necessary, particularly if you have specifically dedicated work premises, as this will help to cover you if you work with expensive equipment such as video cameras, building equipment and heavy duty tools.
It is Illegal Not to Have Contractor’s Insurance?
Typically, the only kind of business insurance which is actually required by law is Employers Liability. However, there is an exclusion to this rule; this is if you are the only director/employee of your company, for example if you have a personal service company. If it is the case that you have more than one worker in your business, you will likely be required by law to have Employers Liability insurance.
Why Do I Need Contractor’s Insurance?
There are a number of reasons as to why contractor’s insurance is beneficial. You may well find that a large number of recruitment agencies and end clients demand that you hold this kind of insurance before they sign any agreement with you. Interestingly, some of the best umbrella companies in the UK, such as the Transparent Umbrella Company, can assist you with or even provide the necessary insurance policies.
In general, it is good practice to protect your business against unforeseen circumstances. This will provide you with peace of mind whilst you are working as a contractor or in a freelance position.
If you are working outside of IR35, having this insurance in place is a major indicator of your business being on your own account. IR35 is the dedicated tax legislation which is aimed at identifying individuals who are avoiding paying taxes which they should be. If you are operating outside of IR35 Legislation, you should really look into contractor’s insurance.
How Much Does Contractor Insurance Cost?
As with every other type of insurance policy, the cost of the premium you, as the recipient of the policy will pay, does mostly come down to your provider and their criteria and underwriting procedures. But as a rule, premiums for contractor insurance have seen a reduction in their overall costs over the last few years mainly because of a number of providers competing, providing healthy competition to the market.
The exact price of your policy will depend on the provider, the nature of your work, how much you turn over annually and the level of protection which you select on your own accord. For example, a typical IT contractor with a turnover of less than £150,000 per year should be able to easily find a policy that will cost them around £300 or less per year, covering all of their requirements.
Compare Policies and Providers Before You Buy
As with all other forms of insurance, including car insurance and property-related policies, do not simply go for the first deal you see which seems good enough. Insurance is always a large investment, particularly on the longer term, and it may end up protecting your business at some point, so dedicate sufficient time to shop around.
Use comparison tools to see what deals are out there and which appear to suit you and your situation best. Be aware of how comparison websites make their money, however; they do not always display the best deals at the top as certain providers may have actually paid the comparison engine for the slot. Furthermore, providers often invest in advertising space on the comparison site so that they are more visible, but are not always necessarily the best option.