Focus on contractors insurance: what’s essential?

As demand for contractors in the UK increases, your insurance needs to reflect the variety of your work.¹ There are different policies for the range of risks that are involved in contracting. It’s more important than ever to ensure all your administration is up to date, which means taking a little time to look at your insurance. You and your business need to be protected against potential risks, so we’ve highlighted some of the essential covers you should consider:

Public liability

This type of policy protects you against potential injury to a member of the public or damage to property belonging to someone else. As a contractor, your job will mean you are working at different locations all the time, and the risks are varied. For example, you could be moving office equipment around for access, and something gets damaged. If someone makes a claim against you for a slip, trip or fall, or if you accidentally damage something as part of your work, this policy can cover legal costs, as well as compensation payouts. It’s worth noting if you regularly work for public bodies – such as schools or hospitals – you may need to arrange a ‘top-up’ on a separate policy.

Inefficacy cover

This type of policy protects you for any losses resulting from a product or service that you provide, failing to fulfil its function. For example, if you have fitted a burglar alarm and it fails to alert the business owner when a burglary occurs. The business owner could then claim the value of any of the stolen goods from you.

Professional indemnity

We all want our work to be of a consistently high standard. But mistakes do occur, and if you provide inadequate advice or deliver a flawed design that leads to a financial loss, you could be held accountable. For example, if you have provided the underfloor heating for a new building, but problems occur and it has to be redone, potentially delaying other elements of the build and costing the client money. This insurance policy can covers legal costs and payouts - it’s potentially totally different from accidental damage, so it warrants separate cover.

Employers liability

Employers liability is a legal requirement if you employ staff – including sub-contractors. You are responsible for their safety while they are at work and that they don’t get sick or injured because of the work they do for you. This cover can protect you if a staff member was injured or fell ill and believes it’s your fault, as they may try to claim compensation from you.

Insurance is not just about financial protection - it’s about protecting your business reputation. Because of the increasing variety of work, the first four policies are not the only ones you might want to consider.

Other types of insurance include:

• Contents insurance - if you have business headquarters, your equipment (including portable computers and phones) is not covered by standard policies. You will need office contents insurance.
• Cyber insurance - you will no doubt rely on technology to collect and store customer and supplier data. However, your business is constantly at risk of cyber threats, so cyber insurance is also something small businesses and contractors should consider.
• Business interruption insurance - protects your company if a covered incident prevents your business from working effectively, impacting your earnings.
• Goods in transit insurance - covers your products or equipment between jobs or on deliveries.
• Contractors’ all-risk insurance - protects your tools, materials and equipment when you’re using them on-site.

With so many types of cover needed, there is a risk of being over-insured or arranging unnecessary dual insurance when specific sites and projects already have their policies in place. We’ll be covering this in our next article.

If you would like any advice on the different policies and what they mean for you, speak to our contractors insurance experts.

^{Sources:
1 https://home.kpmg/uk/en/home/media/press-releases/2021/08/kpmg-and-rec--uk-report-on-jobs.html}