Contractor Guides

What risks am I taking by operating without insurance?

Every contractor wants to keep their business outgoings to a minimum. When you’re looking to reduce your business spending, it…

Author Photo by Kingsbridge

Every contractor wants to keep their business outgoings to a minimum. When you’re looking to reduce your business spending, it can be tempting to cut away at expenses that seem extraneous to your requirements: a business telephone contract that you’ve never used, expensive professional software licences when a free program works just as well, memberships of professional bodies where you don’t use any of the benefits.

But there’s one contractor cost that should never be cut: business insurance.

It’s true that you may never claim on your insurance. But there are many risks to operating without proper business insurance in place, from the small to the serious. Even without the need to make a claim, insurance is working for you every day, helping you to secure clients, meet the requirements of contracts and as an IR35 indicator.

In the event that things go wrong in the course of business, or you encounter an unhappy client or third party, insurance becomes even more crucial to protect your livelihood, mental health and even your home. This blog looks at the escalating risks of not having proper business insurance in place if you are working as a contractor.

It looks unprofessional

Clients want to hire a contractor that they can trust. If you’re scrimping on insurance (which also provides protection for them, remember) what else are you scrimping on? Being able to demonstrate that you hold comprehensive insurance reassures clients of your commitment and reliability.

It puts you in breach of contract

Almost all contracts specify that the contractor must hold up-to-date public liability, employers’ liability and professional indemnity insurance (often up to specified amounts). If you don’t hold this and you take on the work anyway, your contract could be terminated without notice.

Having to pay for your own legal defence

If you don’t have insurance, and something goes wrong, could you afford to pay for a solicitor to defend yourself? Perhaps a client accuses you of negligence. Perhaps you’re said to be in breach of contract.

Perhaps someone injures themselves tripping over a bag that you’ve left in the corner of a client’s office. Cover to pay for a legal defence against such accusations is a key part of any business insurance. Without it, you’re on your own.

Having to pay compensation and costs for the other side

If you lose a case, you will likely be ordered to pay not only the compensation agreed but also to cover legal costs for the other side. These costs can seriously mount up. With Kingsbridge business insurance, contractors are covered for up to £1 million for professional indemnity claims and up to £5 million for public liability claims.

Without insurance, how would you pay?

Bankruptcy or Insolvency

If you are operating as a sole trader or partnership, remember that the finances of your business are interlinked with your own personal finances. You are personally liable for any debts or losses to your business.A large legal payment could therefore put your own personal assets at risk, including your home. This would be a devastating course of events for any contractor.

Insurance is there to remove any such risk.

If you operate as a limited company, your business finances are separate, but you could still find yourself with business debts that you are unable to pay, meaning your business may become insolvent.

Remember, it’s easy to mitigate against all of these risks. Kingsbridge offers one simple, compliant, comprehensive insurance package, tailored especially to the needs of contractors and freelancers. We have years of experience in supporting people just like you.

Contracting needn’t be risky business: call us today to sort out that business insurance right away: 01242808740.

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