Insuring your limited company
By PaperRocket Accounting, Nov 27 2019 09:52AM
When you first set up your limited company, it’s fair to say there are a number of things that are too important to neglect. Whether it be securing your first contract, setting up your business bank account, or getting yourself and your company registered for all of the relevant taxes, you will have a to-do list that simply can’t be ignored.
And one item that should definitely be on that list is purchasing appropriate insurance for your new company.
Why do I need insurances?
The main reason is to protect yourself and your company in the event of a claim from a third party. In fact, many contracts stipulate that you are required to have a certain level of insurance as a term of the contract (clients may also request proof of this). In some cases (that we will cover below), sometimes insurance can also be a legal requirement.
What type of insurance will I need to arrange?
There are various different types of insurances, so you will need to look at your contract to see what, if any, insurance is required, as well as thinking about what you want to protect yourself against. Many insurances are sector dependant as to whether it would be worthwhile or not, so it is always worth looking up the most common types of insurances required for your particular business sector. Here are some examples of the types of insurance that may be required and/or desirable:
If it is alleged that you have provided inadequate services that causes your client to lose money, then this type of insurance will not only cover the legal costs/expenses incurred in your defence, but also any damages or costs that may be awarded.
As a result, this is probably the most likely type of insurance to be a requirement in your contract. Even if not required by your client, it is still advisable to seriously consider taking out this type of insurance to protect yourself and your business.
As soon as you employ anyone other than yourself, it becomes a legal requirement to have Employers Liability insurance. The policy must cover you for at least £5million and come from an authorised insurer. This insurance protects you against the cost of compensation as a result of employee injury or illness.
You can be fined £2,500 every day that you are not properly insured, so it is important to get this arranged asap once you hire an employee.
This type of insurance covers you for the cost of a claim (whether it be legal expenses incurred during the claims process, and/or any compensation to be paid out) made by a member of the public that has suffered injury or property damage as a result of your business. This could range from someone tripping over your work equipment either at your site or theirs, to a claim that you broke their computer whilst visiting them on business.
This type of insurance is neither a legal requirement, nor regularly seen as a contract condition. However, it is certainly worth looking into if you are going to be visiting client sites, or working around members of the public.
Other types of insurance that may not be a requirement, but could well be desirable from your point of view are:
• Tax Enquiry- this type of insurance provides you with expert defence in the event of a range of tax enquires, including IR35. If HMRC choose to investigate your company taxes for any reason, it can sometimes prove time consuming and costly to deal with the investigation. This type of insurance means that an expert consultant will handle all correspondence with HMRC from start to finish.
• Jury Service & Legal protection- this insures you against costs involved with a list of legal disputes, as well as any loss of income incurred should you be called for jury service during a contract.
• Sickness cover- this would cover you if you have an accident or illness that prevents you from carrying out your contract, and provides a monthly benefit as compensation. You can usually choose how much the policy would pay out as the monthly benefit.
PaperRocket Accounting provide accounting and tax services to professional contractors and freelancers working in the UK.
We offer our clients a flexible choice of fixed fee monthly packages which cover all of their accounting and tax needs (so no hidden costs or surprise bills!). All of our accounting packages include a monthly subscription for a cloud accounting software subscription provided by the awarding winning FreeAgent.
Each of our clients is given their own dedicated qualified accountant with unlimited access in person, telephone, or by email.
We pride ourselves on our client satisfaction and customer service and were awarded 'Welwyn Hatfield Business of the Year 2019' in the SME Hertfordshire awards. We were also runners up and 'Highly Commended' for 'Best Contractor Accountant 2019' in The Contracting Awards, 'Small Practice of the Year 2016' in the AccountingWEB practice excellence awards, as well as FSB Hertfordshire Service Excellence finalists in 2015 and 2016.
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