In an increasingly litigious world there are numerous insurance policies on the market offering to protect you in case you can’t work because of illness or an accident at work, and many contractors are also taking out policies to protect their home office equipment and insure themselves against negligence claims.
This section is meant as a quick guide
only. We strongly recommend that you speak to a professional
insurance broker for individual advice. For advice on any of the
following insurance's visit our Financial Services Section.
Professional Indemnity
Insurance
Professional indemnity insurance
provides financial protection for your company against compensation
sought by a client if you have made mistakes or are found to have
been negligent in some or all of the services that you provide for
them. Claims can occur where a client suffers a financial loss as a
result of alleged mistakes or omissions on your part. Professional
indemnity insurance will also cover any legal costs.
Accountants and financial advisors must have professional
indemnity insurance, though many other professionals also opt for
this type of cover to protect them in the event of legal
action.
Public and Employer's Liability
Insurance
All employers require employers liability insurance. Without it,
the health and safety executive can shut you down. There are a few
exemptions (such as if you are the sole employee of your limited
company, and also own at least 50 per cent of the share capital in
the company).
If you are a sole trader and do not employ anyone, or you only
employ close family members, you should also be exempt. However, if
you occasionally hire staff you must take out
insurance.
Employers liability insurance will cover you if one of your staff
has an accident or is made ill at work and it's found to be your
fault. Note that this only covers employees - if you want to cover
against claims by third parties (i.e. the public) then you will
also require public liability insurance.
Public liability insurance will cover you if someone is
accidentally injured by you or your business operation. It will
also cover you if you damage third party property while on
business. The cover should include any legal fees and expenses
which result from any claim by a third party.
If you are a contractor and don't receive visitors to your own
place of work you may think that you don't require this cover, but
don't forget that it will also cover you if you cause damage to any
of your client's property.
Personal Accident Insurance.
How you would cope if you couldn't work for
any length of time because of an accident or illness is something
every freelancer should consider, especially if they have a
mortgage or a family to support. There are specialist insurers in
the market place who specialize in cover for freelance
workers.
Some Umbrella Companies may provide personal accident insurance as
part of their service, but many now charge an additional fee for
this. Personal Accident Insurance benefits may include:
Home Office and Equipment Insurance
Freelancers now often work from home so
it is important to ensure that you get adequate cover. Your
home office and equipment is unlikely to be covered by your
standard home contents insurance. This insurance will cover you
against accidental damage to equipment, theft of equipment or
documents and more.
Tax & VAT Investigation Insurance
One of the most stressful, costly, and timely events that can
happen to anyone running their own business, is a Tax and VAT investigation. This insurance
protects you in the event of an investigation by HMRC, and is
becoming increasingly more popular amongst freelancers in light of
IR35 and the complications it may bring.
How will I know if I
am caught by IR35?
Legal Expenses (IR35
Insurance)
Legal expenses insurance policies can cover you against the cost of potential legal disputes as well as providing access to legal advice. Increasing legislation can place heavy burdens on businesses and there is an ever-growing list of potential litigation that can be faced, such as contract disputes, employment disputes, property disputes, tax and VAT investigations. Even if you are currently involved in legal action and have no legal expenses cover, it is possible to arrange after-the-event cover that will insure against the risk of covering your opponent's costs if you lose.
Further reading
Cheap public liability insurance - an urban
myth?
What every freelancer should know about PI insurance
Does a contractor with no dependents need life cover?