What Is Contractor Insurance?
Working as a self-employed contractor may give you freedom to be your own boss, but it also means that you…
Starting a business is exciting – but it also comes with risks. Whatever your business, insurance can help protect you from unexpected costs and legal issues. But with so many types of cover available, how do you know what insurance you actually need?
This checklist is designed to help you figure that out. Just ask yourself these questions, match your answers to the type of insurance, and consider if you’d benefit from it.
And while this guide to what insurance you need says “new business” in the title, it can still help experienced business owners understand any gaps they have in their insurance cover.
*Disclaimer – the following is a general guide to insurance and exact coverage may differ per policy and insurance provider. Please always check your policy documentation and/or terms & conditions for more details.
Why insurance matters
While not always a requirement, insurance can have its benefits, whether you’re a new contractor, growing a startup or have an established business. Insurance benefits will vary depending on your business and insurance policy but tend to include:
- Financial protection – Legal disputes, illness, or unexpected business interruptions can be costly. The right insurance helps cover expenses, easing the financial strain and letting you focus on recovery.
- Peace of mind – With insurance in place, you can rest easier knowing you’re prepared if something goes wrong. It’s one less thing to worry about.
- Faster recovery – Support with claims and related costs means you can handle setbacks more efficiently and get back to doing what you do best.
- Client confidence – Insurance shows professionalism and reliability. In fact, some contracts require specific cover types, so being insured can help you win more work.
What are the different types of business insurance
Before we dive into what insurance you might need, it’s good to understand the different types of business insurance you might come across. Knowing what they each cover will help you start to understand what types of cover you might need. A quick overview:
Public liability insurance
Public liability (PL) insurance helps cover legal liability for accidental bodily injury or property damage to third parties arising in connection with your business.
Professional indemnity
Professional indemnity (PI) can cover you against civil liability claims if a client sues you for financial losses caused by your work – professional negligence, bad advice, missed deadlines etc.
Personal accident cover
Sometimes referred to as ‘occupational accident cover’, it can provide a weekly sum in the event you’re injured on the job (including travel to/from work) and unable to work – or a lump sum if an injury is permanent.
Cyber liability insurance
Cyber liability insurance can cover your business if a cyber attack or data breach leads to financial loss, including costs like legal fees, recovery costs, and reputation management.
Employers’ liability insurance
The only insurance that is a legal obligation for many businesses, employers’ liability can cover legal costs and compensation if an employee gets injured or ill because of and during their employment.
Legal expenses cover
Legal expenses insurance can cover costs for advice and representation in work-related disputes – like contracts, employment issues, tax investigations, or your intellectual property.
Directors’ and officers’ liability
It protects company leaders if they’re held accountable for financial mismanagement, a health and safety failure, a breach of legislation or of breaking company law.
IR35 insurance
It primarily protects limited company contractors from costs arising from an IR35 enquiry. This can include defence costs, taxes and interest — on top of any penalties payable to HMRC.
How do you know which insurance your business needs?
Like we said, most insurance types (except employers’ liability in many cases) aren’t specifically “needed”, but based on the benefits you may decide for yourself that it would be a good investment for your business.
To help you understand which business insurance cover might be worth consideration, we’ve simplified it down to 7 questions. So, all you have to do is answer the question and gauge how relevant that insurance type is for you.
1. Do you work at clients’ homes or premises (or do they visit you)?
→ You should consider public liability Insurance
Examples:
- A client is injured after tripping on a tradesman’s discarded tools
- A freelancer knocks over and damages a client’s specialist equipment
- A client in injured when visiting an SME’s office premises after tripping on loose carpet tiles
2. Do you employ anyone?
→ You’re legally required to have employers’ liability insurance
Examples:
- An office worker hurts their back taking delivery of a heavy parcel for the business
- A junior designer develops repetitive strain injury from poor workstation setup
- A trades employee develops health issues (asthma) from working on construction sites
Note: Some business types are exempt from the legal obligation to hold employers’ liability insurance. Check out our business guide to employers’ liability for more info.
3. Do you give advice or offer professional services?
→ You should consider professional indemnity insurance
Examples:
- A copywriter’s campaign contains a factual error that damages a client’s reputation
- A web developer’s site crashes during a product launch
- A business consultant gives advice that leads to financial loss
4. Do you produce, supply or install products to/for customers?
→ You should consider product liability Insurance
This protects you if a product you manufacture or install causes harm or damage.
Did you know?
You can get product liability included with Kingsbridge’s Public Liability Insurance
Examples:
- A seller’s product has a design defect, causing injury to a customer after following instructions
- An electrical device installed by a contractor turns out to be faulty and causes a fire
- A toy breaks and injures a child
5. Do you store customers’ personal data or rely on digital systems?
→ You should consider cyber insurance
This protects against data breaches, hacking, and cybercrime.
Examples:
- A hacker steals customer payment details from your vulnerable website
- A phishing attack locks you out of your systems
- A ransomware attack halts your online store
6. Are you a company director or decision-maker?
→ You should consider directors’ and officers’ insurance
Examples:
- A shareholder sues over financial mismanagement
- A former employee claims against health & safety issues
- A regulatory body investigates breaches of company law
7. Do you work in a specialist industry or face unique risks?
→ You should consider tailored cover
You may need industry-specific insurance depending on your field – tailored cover typically includes insurance designed for industry-specific risks.
Examples:
- Construction: tradesmen insurance, tools cover, plant cover, contract works
- Creative industries: business equipment cover
- Worker supply chain: (contractors, recruiters & end clients): IR35 insurance
Final insurance checklist
Hopefully the above questions have helped you understand the types of business insurance you may want to consider based on the risks you face. Business risks will vary not just across industries but also job roles within those industries.
Along with the questions above, for a better understanding of what insurance cover you might benefit from, you can also consider these last few tips:
- Ask the right questions about your business – are you thinking about how you operate?
- Identify legal requirements – does your contract or industry regulations require it?
- Choose cover based on your risks – are you focusing on what’s relevant? The guide above should help with this.
- Review your insurance annually – if you already have some insurance in place, do you check it regularly? Businesses grow and so do insurance needs (like cover limits and coverage needs).
Getting help with insurance
While the info above is there to help you start to understand the business insurance cover you might benefit from, we know you’re busy being the experts in your field, not insurance!
That’s why at Kingsbridge we have dedicated in-house experts ready to answer your questions and help you find the right insurance cover.
We offer:
- Comprehensive policies designed for different industries
- Competitive pricing, quoting the same price new and existing customers
- Price promise for eligible quotes
- Policies underwritten by A-rated insurers
- Nil excess on professional indemnity and public liability claims (as per policy schedule)
- Retroactive cover on professional indemnity insurance at no extra cost
Interested in a quote or need help finding the right cover for your business? Get a quote online in seconds or give us a call to discuss your needs on 01242 808740.
New business insurance FAQs
Still have questions? Here’s what other business owners are asking:
Do I legally need business insurance to start a company in the UK?
The only business insurance that’s a legal requirement is employers’ liability insurance – this is mandatory if you employ anyone. While other types of insurance aren’t a legal requirement, you may find some are necessary as part of contractual obligations.
What insurance do I need when starting a small business?
At minimum, you need employers’ liability if you have staff. Other insurance types aren’t “needed”, but public liability and professional indemnity are strongly recommended depending on your business type.
Can I run a business without insurance?
While you can run a business without insurance, it’s considered risky. You could face large legal or compensation costs if something goes wrong. You could also face fines if you employ people but don’t hold employers’ liability cover.
How much does business insurance cost in the UK?
Business insurance costs will vary depending on your business type, size and risks. If your policy includes extended coverage and higher limits, this can also increase your insurance premium.
What kind of insurance does a sole trader need?
Typically, a sole trader should consider public liability and professional indemnity. Employers’ liability is only needed if you hire others.
What’s the difference between public liability and professional indemnity insurance?
Public liability covers injury or property damage to third parties. Professional indemnity covers claims for negligent professional advice or services. You can find out more in our public liability vs professional indemnity guide.
Do I need business insurance if I work from home?
While not mandatory, many businesses owners may benefit from business insurance if working from home. It can cover business risks that home insurance won’t cover – like client injuries, service errors or equipment damage. You can read more in our guide to insurance if you work from home.
What insurance do I need for online or digital businesses?
Common insurance for online or digital businesses includes cyber insurance, professional indemnity and legal expenses. These can protect your business in the event of cyber incidents, professional negligence and legal enquiries respectively.
What happens if I don’t have the right insurance?
There could be financial implications if you don’t have the right insurance. For example, if you don’t have employers’ liability whilst employing someone (a legal requirement) you could be fined. You could also be left to foot the bill for any legal claims, financial losses or compensation fees without the support from insurance cover.
