What Insurance Do I Need as a Limited Company Contractor?

If you’ve decided to contract through a limited company and are wondering about what insurances you need, then this article is for you. Setting up a limited company as a contractor means taking on the responsibility for protecting your business, meeting client expectations, and demonstrating that you operate as a genuine company. Having the right insurance in place is part of that picture and in many cases, it’s not just recommended but required before a contract can begin.

Below, we look at the main types of insurance you need to consider as a limited company contractor, how they protect you day-to-day, and how they can support your IR35 status.

• Having the right insurance protects your business and shows clients you operate as a genuine limited company.
• Professional indemnity insurance covers mistakes, negligence, or professional disputes with clients.
• Public liability insurance protects you if someone is injured or property is damaged because of your work.
• Employers’ liability insurance is a legal requirement if you employ anyone, even family members.

This type of insurance protects you if a client claims that you’ve made a mistake, gave them incorrect advice or breached professional duties. Even where you’ve delivered everything correctly, misunderstandings can happen, and you may still have to defend yourself.

Having professional indemnity will cover any costs needed to pay compensation to correct a mistake or settle a claim, and it can also cover legal defence costs.

Professional indemnity insurance typically covers:

• Negligence or professional errors
• Breach of confidentiality
• Copyright or intellectual property issues
• Defamation
• Advertising or communication mistakes
• Errors made by subcontractors or outsourced workers

Because contractors often work autonomously and are responsible for delivering the agreed upon service, clients tend to expect that you carry your own professional indemnity cover. Some won’t allow you to start work without it, and many specify minimum cover limits in the contract.

If you use subcontractors, it’s important to understand that mistakes made by anyone working on your behalf can still fall under your liability. Having professional indemnity insurance ensures that you are protected.

Public liability protects your business if someone is injured or if property is damaged as a result of your work.

Contracts that involve on-site work or the use of specialist equipment often require proof of public liability insurance. Some clients will include it as part of their standard onboarding process, even for desk-based contracts.

If you work across multiple locations or travel to client offices, check that your policy covers the areas where you operate and any subcontractors you may use. While these types of claims can be rare, the financial consequences can be serious so make sure your business is covered.

This cover protects your company if someone who works for you becomes ill or injured as a result of their job.

Having the minimum level of cover (£5,000,000) is a legal requirement if you employ anyone, even if that person is a spouse or family member. It’s also common for agencies to require contractors to hold employers’ liability insurance regardless of company size.

Keeping an up-to-date certificate is important as clients may request it at any point during a contract.

Insurance plays a meaningful role in demonstrating that you operate as a genuine business rather than as an employee. Under IR35 rules, one of the indicators of being “in business on your own account” is whether you take on financial risk.

If you hold professional indemnity and public liability insurance, you are showing that:

• You operate independently as a supplier, not as staff
• You take responsibility for professional mistakes and third-party risks
• You behave like a business and have the right protections in place

It’s worth noting that insurance alone cannot place you outside IR35. However, having insurances does strengthen your broader position when combined with other business indicators such as having your own equipment and the ability to send a substitute in your place.

Here are some considerations when putting your insurance in place:

• Review the insurance requirements in your contract
• If you work with subcontractors, ensure your policy includes their activity
• Review your cover annually, especially as your services or working arrangements change
• Keep your insurance documents organised so they can be provided quickly when requested

Insurance may feel like an added expense, but the cost of not having it can be far higher. Claims, legal disputes, contract delays or IR35 challenges can all have a significant impact on your business. It’s always worth making sure you’re fully protected.

When you sign up with SG Accounting, you’ll get preferential rates with a choice of insurance partners offering contractor-specific and general packages. This could be Professional Indemnity, Public Liability, Employers Liability, cyber cover or even general office insurance. And all new clients get their first 3 months of Fee Protection Cover for free.

Use our bespoke links for a 10% discount with:

Use code SG10 for Qdos

If you operate as a limited company contractor, the right insurance is essential both for protecting your business and for demonstrating professionalism to agencies and end clients.

If you need help understanding which insurances you need, speak with your client director or get in touch if you’re not already an SG client.

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