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What insurance do contractors need?


A contractor wrestles with a client's demands, safe in the knowledge they are covered by insurance for contractors

Contractors are the lifeblood of the British economy. There are over 4 million of them in the UK.

And they contribute £278 billion to our GDP.

Almost every sector relies on contractors. The construction and building trades are propped up by them. And our transport sector would be lost without them at the wheel.

They’re a varied bunch, that’s for sure. So, it can present a bit of a challenge when it comes to insurance.

After all, ‘contractor insurance’ surely can’t cover every kind of contractor, can it? And what kind of insurance does a contractor need?

Well, that’s what we’re here to find out.

Why do contractors need insurance?

Contractor insurance requirements come down to one thing: protecting yourself.

As someone who’s self-employed, you’re liable for any mistakes you make. Depending on what you do, you could face lots of risks every day. So, it pays to be covered.

Let’s say you’re an IT contractor. You work for a client a couple of days a week, managing their IT systems.

One day, you install a new piece of security software. Unfortunately, it turns out to be badly suited for their needs. It’s quickly overwhelmed and leads to a minor data breach.

In this situation, your client would be well within their rights to sue you for negligence. As a contractor, you’d be liable for any damages and legal fees.

Professional mistakes like this happen to all of us. Whatever industry you work in.

It might not even be a professional mistake. A client could injure themselves on your property, leading to a claim.

Your insurance is your safety net. It backs you up, so that a claim isn’t the end of the world.

What type of insurance does a contractor need?

It depends on what kind of contractor you are.

A freelancer marketer will need different cover to a tradesman. The same is true of a writer, a virtual assistant, and a cybersecurity professional.

For the sake of brevity, we’ll talk about a few of the most common types of insurance that contractors may need.

Professional indemnity insurance is the obvious place to start. For many contractors, it’ll be the most important type of insurance they get.

If you’re a professional who offers paid services to clients, it’s a must-have. If a client accuses you of negligence, giving bad advice, or making a mistake, they can claim against you for any losses they suffered.

Even if the claim is baseless, you’ll still have to defend yourself. Which is where professional indemnity insurance comes in. It pays for your legal expenses and any damages you may owe.

But there’s more to think about…

Slips, trips, and falls

Another big cause for claims against contractors comes when you’re visiting clients. Or they’re visiting you.

Maybe a client asks for a last-minute meeting. You pop over to their offices and, while you’re discussing some work, you accidentally spill some coffee on their laptop.

Repairing or replacing it is your responsibility, as it was your fault.

Public liability insurance is for situations like this. It pays your legal fees and any compensation you owe, if the accident is found to be your fault.

As well as covering you when you’re out and about, it also has your back if your clients visit you.

Consider your options

In general, professional indemnity and public liability are the two most common types of contractors’ insurance.

They’re also the two types of insurance that your clients will probably want you to have. It’s a great idea to check your contractual obligations to make sure you’re properly covered.

But, other types of insurance that might be just as important for you.

For an IT contractor or a virtual assistant, cyber insurance might be at the top of your list. It’s perfect for anybody that handles a lot of data for their clients. Or is responsible for data processing.

Especially as 32% of businesses were hit by cyber-attacks in 2023.

It pays for your legal fees to defend yourself, sorts out any compensation you might owe, and covers your lost earnings.

You’ll also get access to experts who can help you stop the cyber-attack. And lend you a hand to get you back on your feet afterwards.

For any contractor that’s on the go and relies on their kit to get the job done, portable equipment insurance would be a worthwhile investment.

Whether it’s your laptop, phone, or specialist equipment, it’ll pay to repair or replace the tools of your trade if they’re damaged, lost, or stolen.

Those are just a couple of examples of more specific kinds of insurance that might be right for you.

Other types of insurance like legal expenses or business contents might be great too. Or employers’ liability if you outsource your work to subcontractors working under your direction.

At the end of the day, it depends what kind of contractor you are and how you work.

What does contractors’ insurance cover?

Well, there actually isn’t anything called ‘contractors’ insurance’. It’s actually a package of different covers.

In reality, contractors’ insurance will cover different things for different people.

You might need cyber insurance and professional indemnity, or public liability and business contents.

The main thing is that you’re covered for the risks associated with your sector.

This need for flexibility is why a lot of insurers will let you bundle different covers together into ‘contractors’ insurance’.

It makes it a lot simpler. And much easier to manage when it comes to buying and renewing.

It’s worth noting as well that certain contractors might need to look for specialist insurers. For example, if you’re a self-employed truck driver, you’ll probably need to speak to an insurer specific to your industry.

This is because a lot of sectors have complex risks that not every insurer has the expertise to manage.

Contract the right insurer

As a contractor, it can be daunting having to sort out your own insurance.

There are so many different types of cover to consider. Not to mention having to navigate the nuances of insuring properly for your industry.

But it’s well worth it. Being hit by a claim when you’re self-employed can feel like the worst thing in the world. Insurance is there to get you back on your feet. So you can continue your solo journey.

Remember, though, that contractors’ insurance isn’t the same for everyone. The type of cover you need will depend on what you do, where you work, how you work, and much more.

Feel like having a chat with an expert? Give us a call on 0345 222 5391.

Image used under license from iStock.

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