All about Insurance for Contractors

When you’re contracting, most of your clients will legally require you and your company to be covered by insurance before they will give you the work. It’s also essential for your own peace of mind. But what type of insurance do you need, what does it cover, and what does it cost? Read on to find out more, and about the support we can offer you when it comes to finding the best insurance.

Why do contractors need insurance?

To get the contract

Most clients will not sign a contract with you unless you are insured – having the appropriate insurance cover in place is now seen as essential by most agencies and end clients.

As an IR35 indicator

Having insurance in place is seen as an indicator of self-employment if you’re working outside IR35, as it shows HMRC that you’re in business on your own account.

To cover mistakes

If you make a mistake during a contract and it costs your client financially, they could claim against you or your company. This could be because of a technical error, advice that didn’t turn out to be the best, or an accident resulting in damage to hardware.

In case of HMRC investigation

All businesses are at risk of tax investigations, usually with nothing to worry about. However, with rules around IR35 changing and being confused over the years, many contractors worry about having past contracts investigated and being retrospectively found ‘inside’ IR35.

What type of insurance do contractors need?

There are a various types of insurance cover that protect against different things. It’s generally agreed that the following are the best for contractors, and a bundle that includes these beauties covers all eventualities:

Professional Indemnity

Professional indemnity insurance can help protect your business if a client claims there’s a problem with the work you’ve done for them. It can cover your costs if you need to pay compensation to correct a mistake or settle a claim, and covers the cost of your legal defence.

Professional indemnity insurance can provide invaluable cover to businesses providing professional advice or services to clients which could be challenged.

Public Liability

Covers your business if someone else is injured, or property is damaged as a result of your actions while contracting for that client for example, you drop a piece of pricey IT kit that you’re moving.

Public liability insurance protects against the cost of any claims from third parties, such as compensation payouts and legal costs.

Employer’s Liability

Covers you against claims from employees. It’s likely that employees will only be you and maybe your spouse so claims are unlikely, but many agencies or end clients will still insist on it.

IR35/Tax Investigation Insurance

With new IR35 rules, HMRC can determine whether or not a contract represents ‘disguised employment’ based on a number of criteria, including employment status rules as well as a growing number of court rulings and precedents. If you are retrospectively found ‘inside’ IR35, tax has to be paid back, as well as fines issued.

Tax Investigation Insurance protects you and your Company from additional costs incurred with an HMRC enquiry (including IR35 enquiries).

Free Insurance with Aardvark

At Aardvark Accounting, we have partnered with Hiscox Insurance and Markel Tax to provide a free bundle of insurance to Limited Company Contractors on our Essentials Plus or Duo packages. The insurance is especially designed for contractors and includes the following:

  • Professional indemnity insurance – £2,000,000 cover from Hiscox
  • Public liability insurance – £5,000,000 cover from Hiscox
  • Employer’s liability insurance – £10,000,000 cover from Hiscox
  • Tax investigation Insurance – £100,000 cover from Markel Tax
Insurance Policy Documents
Insurance Key Facts