Protecting yourself with contractor insurance is vital. Here’s why…

26th September 2017

Article written by:

Chris from iContract

With just under 2 million freelancers and contractors in the UK, independent working is fast becoming the new way of working, as tens of thousands of people each year leave the confines of permanent employment, and go in search for more freedom, choice and control over their career.

And as a contractor working through a limited company, it’s becoming all the more important to protect yourself with insurance. That goes for whether you’re looking to protect your business from mishaps or unexpected problems, or simply to stay compliant with changing client and agency requirements. Increasingly, insurance isn’t a luxury, it’s a necessity.

As a Director or owner of the company, it’s your responsibility to ensure you are working compliantly, protecting your business and your client. Typically, freelancers and contractors usually hold Professional Indemnity Insurance, Public Liability Insurance and Employers Liability Insurance. Put simply, these protect you against forms of negligence.

As a contractor, you might also want to get cover for Jury Service, Legal Cover and Sickness Insurance. The cost of insurance is minimal and the benefits of protection are sky-high. That aside, there are a number of other reasons why you need contractor insurance.

Changing employment landscape.

As the world of work evolves, so does employment legislation. Recent changes to IR35 in the public sector, and widely expected reform in the private sector has made it all the more important that you think seriously about taking out IR35 insurance.

IR35 sits at the top of HMRC’s agenda, so plainly speaking the need for insurance has never been greater. IR35 is a complex legislation which is easily misunderstood and misinterpreted. IR35 Insurance will protect a contractor should they be investigated by HMRC, and also provides cover for the tax, NIC liabilities and penalties, should they be caught by IR35.

Policies vary, and some simply cover the defence costs of an IR35 case, while others will give you added peace of mind and a tax expert dedicated to fighting your case. The vast majority of cases which HMRC have won, are where the contractor does not have IR35 insurance or expert representation.

Taking out business insurance also suggests to HMRC that you work genuinely self-employed, operate as a business and belong outside IR35.

Client requirement.

Increasingly, clients require contractors to hold Professional Indemnity Insurance. This protects your business against a client who may have suffered a financial loss as a result of your error, omission or negligence.

Mistakes cannot always be prevented. Imagine you make a mistake in the advice or services provided and a client, acting on this advice, suffers a loss, Professional Indemnity Insurance can prove to be invaluable. Many policies cover contractors up to £1m, but depending on your type of work, you can get cover for up to £5m.

Agency requirement.

Regardless of whether you work through an agency or direct to your client, you’ll still need to take out insurance. Many middle-men often require contractor insurance, and the agency’s insurance will not cover your business. As always, it’s better to be safe than sorry.

Peace of mind.

Insurance covers you against a variety of circumstances. From falling ill, to having an accident or dealing with a contract dispute, there are simply some things you can’t prevent. But that’s not to say you can’t plan for or protect yourself against them. Above all, contractor insurance will bring you a little peace of mind as you look to get on with running your business.

With over 20 years of experience in providing advice, support and insurance to freelancers and contractors, Qdos Contractor offers a tailor-made range of insurance products and services.