Mind your own business… with contractors' insurance
Are you a building contractor, independent IT specialist or accountant? Whatever type of contract work you do, it’s important to get insurance to protect you and your business. It can pay out for things like your business equipment failing or getting damaged, or if you’re held liable for accidentally damaging someone’s property while working.
Contractors’ insurance can bring together a range of business cover options like public liability insurance, professional indemnity insurance, personal accident and portable equipment cover. You can tailor a policy so it includes exactly what you need for your particular type of work.
- Contractors’ insurance isn’t a legal requirement, but it can provide valuable protection against the risks involved in working as a contractor
- A policy can combine different types of cover including public liability and professional indemnity insurance
- If you employ one or more people, it’s a legal requirement to have employers’ liability insurance
Why do I need contractors’ insurance?
Running your own business and working on a contract basis for clients comes with all sorts of risks. You could be held liable for accidents, injuries and mistakes. You may get injured yourself while working or damage vital business equipment.
Contractors’ insurance can help protect you.
For example, having public liability insurance as part of your contractors’ insurance policy can be helpful if you accidentally damage a client’s expensive IT equipment. Or if a client comes to your home, injures themselves by tripping over a rug, and sues you.
Then there’s all the equipment you work with – whether it’s expensive tools, computers or tech. Contractors’ insurance can pay out to repair or replace equipment that gets damaged. So you don’t have to dig into your earnings and can carry on working to schedule.
And personal accident cover as part of contractors’ insurance can pay out for loss of income if you have an accident and an injury leaves you unable to work for a prolonged period.
Without contractors’ insurance, you could find yourself losing a lot of money if something goes wrong.
Is contractors’ insurance a legal requirement?
The only type of contractors’ insurance that’s legally required is employers’ liability insurance - and that’s only if you employ one or more people.
It provides financial protection if an employee gets ill or is injured as a result of their work and they sue you for compensation. For example, if a builder you employ falls off a ladder and suffers severe injuries.
Other parts of contractors’ insurance aren’t required by law. But they can offer valuable cover for you and your business.
What does contractors’ insurance cover?
You can adapt contractors’ insurance to suit your trade. So, depending on what type of business you run, policies can include:
- Public liability insurance - Provides cover if someone is injured or their property is damaged as a result of your work, and they make a claim against you for compensation. For example, if you’re decorating a client’s home and you accidentally smash a window. The cover will pay out for damages and legal costs.
- Employers’ liability insurance - Covers claims against you by an employee who is injured or gets sick while doing their work.
- Professional indemnity insurance - This cover helps if a customer or client claims that you made a mistake in your work, gave them poor advice or didn’t meet the brief adequately. Your insurance will cover legal costs to defend your case and pay out for any damages awarded.
- Tool cover - Pays for the cost of replacing or repairing tools or equipment that are lost, damaged or stolen, up to an agreed amount.
- Business and office equipment - Covers theft, loss or damage of items like your computers, laptop and printers.
- Hired-in plant insurance - Covers machinery you’ve hired, like diggers, concrete mixers and forklift trucks in the event they’re stolen or accidentally damaged.
- Owned plant insurance - You’re covered for theft, loss, accidental or malicious damage to your own plant machinery.
- Contract works insurance - For construction workers, this covers work that’s in progress on a domestic or commercial site. So if something happens to disrupt, delay or damage the work you’ve done, it’ll pay out. For example, if there’s a fire or flood that destroys the work you’ve already completed.
- Legal expenses insurance - Helps pay for legal costs if you need to pursue a claim or defend against a lawsuit. For instance, employee disputes.
- Personal accident insurance - If you’re injured at work or while commuting to work. It can pay out a weekly sum or a lump sum to help you financially after a serious injury.
Contractors' all risks insurance
Contractors' all risks (CAR) insurance is a comprehensive ‘all-in-one’ policy that combines important protection for the tools of your trade, plant equipment and business materials, along with things like public liability cover and contract works insurance.
You can get separate policies for all of these. But a CAR policy can make claiming a lot easier as you only need to liaise with one provider. It could also be cheaper than buying separate policies from different providers.
Generally covered under CAR insurance is:
- Severe wind
- Water damage
- Construction faults
- Human error
What’s not usually covered is wear and tear, poor workmanship and wilful negligence.
For some CAR policies, you can get add-ons for things like damage to surrounding property, terrorism, loss due to broken glass and debris removal.
Professional indemnity for contractors
This covers you if a client claims you’ve made mistakes, been negligent or failed to perform the contracted job. Or that your services or any advice you gave them resulted in financial losses.
Professional indemnity insurance will cover the costs arising from a claim against you. This could include paying for a solicitor to defend your case and any damages awarded to your client.
Did you know...?
Insurance policies may be invalidated if certain safety procedures aren’t followed, or tools aren’t stored correctly.
Do I need contractors' liability insurance?
If you come into contact with any third party in your contractor profession, you might need to get contractors' liability insurance.
Liability insurance will cover the costs of a third-party claim against you.
For example, if you were employed by a shop to fit some new shelves, and someone trips over your tools, they could make a claim against you, which could be expensive.
Frequently asked questions
You can tailor contractors’ insurance to cover your business. Talk to your provider to discuss your needs. You can also buy specialist contractor policies for most lines of work. For example, builders’ insurance, electrical contractors’ insurance, plumbers’ insurance and freelance insurance.
It’s a legal requirement that you have employers’ liability insurance in place if you employ people. Even if you only have one employee.
It covers your costs if an employee claims compensation for an illness or injury that happened at or because of their work.
If you’re unsure whether you need this type of insurance, you can check at legislation.gov.uk.
Always be sure to carefully check a contract for work before you sign and agree to the terms. Keep copies of emails and other correspondence, too, in case of disputes further down the line.
It’s wise to take out contractors’ insurance as soon as you start working as a contractor. Things can go wrong at any time - including on the very first day of a project - so it makes sense to cover yourself from the very beginning.
Some employers will insist that you have insurance that includes public liability cover in place before they enter into a contract with you. They may ask to see proof of this cover before work commences.
Even if you’re not contractually obliged to have contractors’ insurance, it’s important to have cover in place for protection if something goes wrong.
Consider combining different types of business insurance into one contractors' insurance policy, as it could prove cheaper and easier than arranging separate cover.
And be sure to compare prices from multiple providers, too.