If you are self employed or you work as a contractor or freelancer, it's up to you to look after your own insurance cover. While your client, and any agency you work through, may have their own insurance arrangements, these won't usually protect you
Liability insurance for the self employed, contractors and freelances
You should think about protecting yourself against claims if someone thinks you've caused them loss or injury. For example, your client might sue you if they think you've done substandard work that ends up causing them loss. Or you might face a claim after accidentally injuring a member of the public.
Although you aren't legally required to have this kind of insurance, clients may require you to arrange it. This may be a condition of their own insurance, and also helps reassure them that they'll be protected.
Having your own insurance can also be part of demonstrating that you're a legitimate business, rather than a disguised employee of your client. This can be important if you want to be treated as genuinely self-employed, or to avoid having the IR35 rules applied to how your company is taxed.
The kinds of insurance you need depend on your particular business.
- If you give advice or provide professional services, you should have professional indemnity insurance.
- Public liability insurance covers injury or loss caused to members of the public. This includes anyone you might harm while working at your client's premises.
- If you work through a company but don't own the majority of shares, or if you have other employees, you are legally required to have employers' liability insurance.
Importantly, liability insurances generally cover both the costs of defending a claim and compensation that might be awarded against you. Having insurance puts you in a much stronger position to defend a claim, rather than being forced to settle because it's too risky not to.
Other insurance policies for the self employed
As a self employed worker, a contractor or freelancer, you're likely to use your home as an office. You should make sure that you take out home business insurance so that you are adequately covered - your standard home insurance is unlikely to cover you for running a business from home. Let your insurer know what you do and check that this is covered. In many cases there will be little or no impact on your insurance premium.
If you use your car for business, for example to drive to client premises, you must check with your insurer. Ordinary private insurance may not cover you for business use so you will need to take out specific business vehicle insurance.
You should check that any business equipment you have is included in your insurance cover. For example, you might want to insure your laptop, equipment or tools. You may need to pay extra, and comply with various policy conditions, so that your equipment is covered while you're travelling or at a client site.
You may want to take out tax insurance to cover the risk of an investigation by HM Revenue & Customs. This can cover the costs of defending your tax arrangements and any backdated bill if you lose. Some insurers offer an IR35 review service that checks your contracts and working practices.
You may also want to consider personal insurance, such as sickness and life insurance, to protect you and your family.
Insurance costs
Business risks vary widely for different types of freelancer and contractor. IT contractors and consultants have completely different risks from tradesmen and gardeners, let alone contractors working overseas or on offshore installations.
Insurance costs for an office-based contractor might be minimal. Riskier businesses, and business with higher turnover or extra employees, will cost more to insure.
Even if you only work intermittently on short-term contracts, it's important to maintain continual insurance cover rather than trying to cut costs by only insuring yourself periodically. Liability insurances typically only cover you for claims made while the policy is in force. If you let the policy lapse, you are no longer covered if a claim is made later.
