Is your business insurance meeting your needs?
So, your business insurance is due for renewal, or perhaps you’ve let your current cover lapse over lockdown. Reviewing your contractor insurance can be a minefield, as you try and figure out what cover you actually need.
Do you really need employers’ liability? What does ‘in the aggregate’ mean? And if you moved insurer, would you be covered for previous work?
We’ve put together some common questions that you should think about when buying or renewing your contractor insurance – to tackle the insurance jargon and ensure the cover you buy meets your needs.
1. Does your insurance meet your contractual requirements?
As a limited company contractor, it is your responsibility to protect yourself and your business. Your recruiter or client may stipulate that you have insurance in place before starting the work. Not having the required level of insurance agreed upon in your contract could put you in breach of your contract.
The most common types of insurance you will be asked to have in place are professional indemnity (PI), public liability (PL) and employers’ liability (EL). Before buying business insurance, it’s always worth double-checking your contract to ensure the cover you have matches what is required in your contract.
2. Does it contain all the insurances you need?
There are plenty of great reasons to work for yourself, but one of the biggest disadvantages is that you don’t have the safety net that a full-time employee of a company has. If a mistake is made, it will fall to your company to rectify it. It’s therefore important to consider what insurance cover you need.
This provides cover for negligence, errors or omissions, and is a common insurance requirement that may be specified in your contract.
Public liability insurance provides cover for damages or injury you cause to third party persons or property – for example, leaving a bag in your client’s office which causes a member of their staff to trip and injure themselves.
Occupational Personal Accident
If you’re injured whilst working or commuting to work and are unable to fulfil your contract, occupational personal accident cover would typically allow you to claim a weekly amount to put towards your living costs.
The cover will also usually pay out a lump sum if the accident leaves you with a permanent disability or causes your death, meaning you and your family are looked after financially.
If you employ anyone in an admin or clerical role, you need to ensure that they’re protected as well. If this is the case for you, then it is a legal requirement for you to hold the appropriate insurance.
Directors’ and Officers’ Liability
As the Director of your company, you could be held responsible for health and safety failures, breaches of company law or legislation, and any financial mismanagement that may occur. Director’s and Officers’ liability would provide cover for defence fees, which can rack up to hundreds of thousands of pounds – even if you haven’t done anything wrong.
3. Is your Professional Indemnity cover any one claim or in the aggregate?
What is the difference between any one claim and in the aggregate?
In the aggregate
If your cover is ‘in the aggregate’, it means that you are only covered for the total sum insured over the whole policy year. So, if you have professional indemnity cover up to £1 million and make a claim for £300,000, this will leave £700,000 in your ‘pot’ for public liability.
This could leave you underinsured in the unfortunate event that you have more than 1 high-value claim in a year. It would also leave you in breach of your contract if you are required to hold £1 million professional indemnity cover.
Any one claim
Some insurers, such as Kingsbridge’s policy, will offer cover under ‘any one claim’. This means the level of cover you are insured for is held for every claim that you make, ensuring you will maintain your contractual requirements, even if you do have to claim during the policy term.
4. Are you covered for previous work?
Some insurers will only offer professional indemnity cover on a ‘claims made basis’. This means that for your cover to protect you, it must be in place at the time the claim was made and reported. A professional indemnity claim can take years to come to light, so this could leave you unprotected.
One way you can protect yourself from this eventuality is by checking if your professional indemnity insurance has ‘retroactive cover’, which would provide cover for previous work that you have carried out. You can find out more about retroactive cover here.
Some insurance providers, including Kingsbridge, will provide retroactive cover free of charge, whilst others will offer it for an additional premium. Your insurer may not offer retroactive cover at all, so be sure to check with them.
5. Do you have the right policy limits?
If a professional indemnity claim is made against you for an error or omission, you may be liable to not only pay for the cost of rectifying a mistake but the cost of delays to the project as a whole – as well as the legal fees.
Even if you are comfortable that your policy meets your requirements, it’s worth checking your documentation for any inner limits within the policy. For example, even if you have a professional indemnity limit of £1million, this could be reduced for certain industries or in certain claim scenarios.
6. How high is your excess?
If you are paying a significantly low premium, it is always worth checking that you could afford to pay the excess in the event of a claim and the payment wouldn’t run into the thousands. If you are insured through an umbrella company or block policy, this excess can be rather steep. At Kingsbridge, we offer nil excess on professional indemnity and public liability claims*.
*Please note this only applies to policies underwritten by Zurich Insurance Co Ltd and does not include policies with a reference containing ‘PL’ or ‘SME’.
7. Is your block policy meeting your requirements?
If you are insured under a block policy, this could well suit your needs, but it might not comply with your contract. Typically, block policies will have a shared limit of indemnity and will not name individual contractors or companies on the policy. This may not comply with agency terms and can put you at risk, as a large claim by one contractor on the policy could wipe out the limit for others in the same scheme and place you in breach of your contractual terms.
If you are unsure whether you are part of a block policy or not, then there are a few things that may appear in your documentation that should help determine whether it is a block or individual policy.
For example, if the policy is issued in the name of your accountant or professional body and not you or your limited company. Furthermore, it may not be an annual policy but instead, have a common anniversary date with other holders.