3 Types of Insurance IT Contractors Should Have (and 1 You Shouldn’t!)
In any type of business, insurance is a necessity. Quite simply, it’s a way to protect yourself, your business, your work, and your clients. But sometimes, there’s more to it than that. In fact, as a contractor, it may be included in your contract that you must have certain types of insurance cover.
The problem is that insurance is rarely something that IT contractors think about. After all, according to the Confidence Index Report, contractors are remarkably positive. They’re thinking of the most efficient and effective ways to manage their project, they’re thinking of enhancing their skills and talents, and they’re thinking of new opportunities. They’re not thinking ‘what happens when it all goes wrong?’
But contractors should be working to ensure a rapid recovery if the worst were to happen, and this can be done through the right insurance. Here are 3 types of insurance IT contractors should think about:
1. Professional Indemnity Insurance
This is perhaps the most common contractual request from clients. Why? Because it directly concerns any issues that clients have with your work, your performance, or your behaviours. Professional indemnity insurance protects you against business-related claims. This could be anything from leaving a confidential document on a train, to accidentally introducing a fatal bug into a client’s existing code.
2. Public Liability Insurance
The ‘public’ aspect of public liability insurance is confusing. In this instance, ‘public’ refers to your clients, rather than to ‘the public’ in the traditional sense. Imagine you’re onsite with a client and spill your coffee all over that server you’ve been setting up. Or imagine you’re working from a small rented office, and your client trips over a loose cable. This is what public liability insurance is for.
3. Tax Investigation Insurance
Normally, tax investigation insurance wouldn’t be a necessity. However, at a time when IR35 regulation has been reformed to identify ‘disguised workers’, and at a time when even the most prolific contractors are getting caught out (e.g. the BBC’s Christa Ackroyd), this is something contractors should consider. This insurance offers assistance if you are required to repay any VAT or national insurance contributions.
And as an added bonus, here’s a type of insurance you probably won’t need:
Employer’s Liability Insurance
This can be a complex area for contractors. The reason? Employer’s liability insurance is actually a mandatory, legal requirement for all businesses… except for some contractors working under a limited company. If your limited company comprises just you, there is no need to take out this type of insurance. However, if your company employs any other person, you must have this by law.
And just to make things even more sticky, there may be times when you DON’T have to have any sort of insurance as a contractor! This is usually if you’re contracting under an umbrella company, which may be required to arrange insurance on your behalf. If in doubt, ask, and confirm your cover with the provider.
However, if you’re a limited company contractor, it is more than likely you will be responsible for arranging your own insurance. If you’re unsure what exactly you need, always seek advice from professionals. This can help to ensure you’re well protected should anything go wrong in the future. Check out our Insurance Directory on ContractHub for details on all the leading contractor insurance specialists.