A Guide to Contractor Insurance
A complex and once expensive area of contractor finance is contractor insurance. Many contractors are now looking at the various insurance policies which are available to them, to protect them in the event of an accident at work, or claims against them for negligence.
Chesterfield has teamed with superior contractor insurance specialists to help guide you through the complexities of contractor insurance.
IT contractors provide professional advice which is relied upon by others (clients). This means if you make a mistake in your work, you have a direct financial responsibility to your client for the error. Whilst you may consider the possibility remote, it does happen.
Increasingly, some clients are insisting on evidence of professional indemnity insurance. Having this protection will prove to your clients that you are professional in your approach, and will help you in obtaining future work. It will also protect you in the rare event that an issue occurs and you are liable. Although mistakes are rare, these policies are now reasonably priced and will also provide peace of mind.
Professional indemnity is a commercial policy that provides financial protection for business owners, freelances and self-employed individuals. In the event that a client claims a service you have provided is inadequate, it is designed to meet the cost of defending such claims made against you, including damages that may become payable.
Whether the client feels you have been negligent in your work, you have delivered the wrong kind of service, have given damaging advice or have left confidential information in an unsafe location, professional indemnity insurance can help to cover the cost of legal fees or correcting your actions. In many cases, it is actually required before you can be considered for a contract.
Claims can occur where a client suffers a financial loss as a result of alleged mistakes or omissions on your part. You may even be sued by a client who is merely dissatisfied, but has no valid claim, leading to substantial legal costs and time away from contracts. Of course, such claims are rare.
In the cutthroat world of modern business, professional indemnity insurance gives you the ability to focus on more important things, such as building your company and focusing on day-to-day responsibilities.
Policies protect you when supplying professional services or giving advice. They can also provide coverage for legal fees or compensation costs, which will help you to survive and thrive beyond court cases.
In many cases, professional indemnity cover also provides industry-specific policies for customised protection. Tricky areas, including defamation and intellectual property, can also be covered by professional indemnity insurance.
This type of policy protects freelance/contractor professionals against their legal liability in the event that they cause accidental damage or loss to someone else’s property.
Examples include something as simple as spilling coffee down the back of a computer or over the keyboard, or knocking a laptop or other piece of IT equipment off a desk. It can also protect you in the event that you cause accidental injury to someone whilst working at a client’s premises. For example, if you have cables running from various machines to a PC you are working on and someone does not notice and trips over and injures themselves.
Your public liability insurance could cover the legal costs and compensation payments incurred in the event that you are held responsible for causing damage to someone’s property or injury to an individual, and consequently sued for such actions. Costs covered will depend on the limit of your policy.
Public liability insurance is incredibly advantageous to individuals interacting with members of the public on a regular basis. It is prudent to take out public liability insurance if you are selling a product or service to the public, as it ensures you remain protected from financial hazards should legal action be taken against you.
Tax & VAT Investigation Insurance
This type of insurance protects you in the event of an investigation by the tax authorities. More and more contractors are investing in this type of policy.
This insurance typically includes protection against VAT disputes with HM Customs & Excise, as well as employer compliance investigations (PAYE, NIC, P11D). This type of cover should not cost too much, although some financial advisors resell packages at a premium, so it’s best to shop around.
Unfortunately, all contractors are at risk of tax enquiries. Dealing with such an investigation alone can be an incredibly difficult, costly, stressful and prolonged process, especially if enquiries are not properly dealt with.
To protect yourself against and tax and VAT investigation, it’s very important to have the right tax and VAT investigation insurance in place. With the right insurance in place, you stand a far greater chance of achieving a successful outcome in the event of an investigation. You will be supported throughout the entire process, while all issues will be dealt with directly on your behalf.
Home Office/Equipment Insurance
Since more and more contractors are working from home, these types of policies are intended to cover the loss or damage to equipment, premises and documents in the event of theft, accidental damage or any other unforeseen circumstances. There are a number of different types of home office/equipment insurance options to choose from. The type you select will depend on your specific circumstances and preferences.
How much do these policies cost?
Policies of this type are far less expensive than you may think, although the final cost will depend on your individual circumstances. The cost of individual polices tends to depend on the following factors:
- The annual turnover of a contractor’s company
- The nature of your business operation
Please contact Chesterfield today to discuss the variety of contractor insurance options at your disposal, or for advice on which contractor insurance policy is appropriate for you.