Business insurance – what a Limited Company contractor needs to know

As a contractor you’ll want to be able to contract worry-free, knowing that you’re 100% covered should the unexpected happen. In order to be able to do so, you’ll want to ensure you have the correct insurance in place, but what will you need?

In this blog we look at just that, why you need each type, and how SG Accounting can help.

Getting started – winning the contract

If you’re a mature contractor you’ll be well aware that for most clients they’ll require you to have the correct insurance in place before awarding you the contract. If you’re new to the game don’t let the absence of insurance slow you down just as you’re about to get going, ensure you have the right insurance in place so that you don’t miss out on your first contract.

Insurance and IR35

Having insurance is viewed by HMRC as an indicator of self-employment if you’re working outside IR35, as it demonstrates that you’re in business on your own account. If you’re new to contracting and are unsure of what IR35 is and how it affects you, take a look at our IR35 resources for videos, blogs, guides and FAQs for all the information you’ll need.

Protection from mistakes

A client may make a claim against your company for damages if a mistake has been made which has cost them financially. These mistakes can be caused by a technical error, substandard advice, or simply an accident which resulted in damages to hardware.

What happens if you’re investigated by HMRC?

Any business is open to the possibility of being investigated by HMRC for a tax investigation, but for the most part there’s nothing to worry about. Whilst this may be the case, with the recent rules surrounding IR35 changing, some contractors may worry about their IR35 status on past contracts being investigated and therefore be found ‘inside’ IR35.

When considering the types of insurance you should have as a contractor, as a rule of thumb the following types are considered essential to protect and cover you against all eventualities:

Professional Indemnity Insurance

Helps to protect your company against any claim your client makes against you should there to be a problem with the work you’ve completed for them. It’ll cover any financial costs if you need to pay compensation to correct a mistake or settle a claim, plus it’ll cover your legal defence costs.

Professional Indemnity Insurance provides invaluable cover to someone providing professional services or advice to their clients via their Limited Company.

What does Professional Indemnity Insurance cover?

• Negligence or breach of duty: if you give your client incorrect advice or make a mistake in your work, and fail in your duty of care
• Infringement of intellectual property rights: such as copyright, trademarks or moral rights, for example if you use any content or images from another source without their permission
• Defamation: creating or supporting slanderous or libel statements about a person or company
• Breach of Confidence: sharing confidential or sensitive information relating to the client without prior permission
• Court attendance: to cover the costs incurred by either yourself or an employee should you need to attend court in relation to a covered claim
• Advertising: if you make a mistake, such as inadvertently making a misleading statement that you’re unable to substantiate
• Sub-contractors and outsourcers: any work that’s undertaken on your behalf will be treated as though you were the person who completed it. The insurer will reserve the right to recover any losses from the subcontractor or outsourcers
• Dishonesty of your employees, director, partners, sub-contractors and outsourcers: any claims made against you and your own direct financial losses

Public Liability

Should equipment or someone else be injured or damaged during the duration of your contract, public liability insurance covers you should any costs be incurred from third parties, including compensation pay-outs and legal costs.

Employer’s Liability

Will cover you should there be any claims from your employees. It’s common for Limited Company contractors to be either the sole employee or for their spouse to be the other employee, therefore claims of this nature are unlikely, but many agencies and clients still require contractors to have employer’s liability insurance.

How can SG Accounting help?

Here at SG we recognise the importance of insurance for Limited Company contractors, and how it can help you contract worry free, knowing you’re protected should the unexpected happen. That’s why we offer our free insurance package to clients who subscribe to our £139 and £159 +VAT monthly packages.

For more information about our specialist contractor services get in touch, or to take a look at our insurance documents for more detail.