Contractor Insurance -
Overview
A complex and once
expensive area of contractor finance, many contractors are now looking at the
various insurance policies which are available to protect you in the event of an
accident at work, or claims against you for negligence. We have created this
section with as little jargon as possible to make this important subject as
accessible as possible. This section was created as a result of feedback from
our regular visitors. You should speak to a professional Insurance Broker for
individual advice.
IT contractors provide professional advice which is relied upon by others
(clients). This means if you make a mistake in your work you have a direct
financial responsibility to your client for the errors. Whilst you may consider
the possibility remote, it does happen.
Increasingly, some clients are insisting on evidence of professional indemnity
insurance and having this protection will prove to your clients that you are
professional in your approach and will help in obtaining future work. Although
mistakes are rare, these policies are now reasonably priced and will also
provide peace of mind.
Professional Indemnity
Provides financial protection for your company and is designed to meet the cost
of defending claims made against you, including damages that may become payable.
Claims can occur where a client suffers a financial loss as a result of alleged
mistakes or omissions on your part. You may even be sued by a client who is
merely dissatisfied, but has no valid claim, leading to substantial legal costs
and time away from contracts. Of course, such claims are rare.
Public Liability
This type of policy will protect you against your legal liability where you
accidentally cause damage or loss to someone else's property (Examples: Coffee
down the back of the computer or over the keyboard, knocking a laptop or other
piece of IT equipment off a desk etc). Also, if you accidentally cause injury to
someone whilst working at a clients premises (Examples: You have cables running
from various machines to a PC you are working on and someone does not notice and
trips over and injures themselves).
Employers Liability
This insurance is arranged to protect employers against claims for injury or
illness brought by employees. Employers' Liability (Compulsory Insurance) Act
1998 requires that employers maintain cover to a minimum of £5,000,000 in
respect of such claims. Many contractors don't take out this type of policy
(since they will be claiming against their own Limited Companies!) - but it is a
statutory requirement all the same. All insurers provide £10m cover as a matter
of course.
Tax & VAT Investigation Insurance
Protects you in the event of an investigation by the tax authorites - more and
more contractors are investing in this type of policy in light of IR35 and the
complications it may bring from 2001 onwards. Would typically include protection
against VAT disputes with HM Customs & Excise and employer compliance
investigations (PAYE,NIC,P11D). This type of cover should not cost too much,
although some financial advisors resell packages at a premium, so it's best to
shop around.
Home Office / Equipment Insurance
Since more and more contractors are working from home, these types of policies
are intended to cover the loss or damage to equipment, premises, documents in
the event of theft, accidental damage or any other unforseen
circumstances.
How
much do these policies cost?
Policies of this type are far less expensive than you may think, although the
final cost will depend on your individual circumstances. The cost of individual
polices tend to depend on the following factors:
