Whether you have just set up a limited company, or you’ve been a company director for a while now, you probably have many different things on your business ‘to do’ list. But one very important item for that list is to ensure that your company is adequately insured. As the saying goes ‘it’s better to have it and not need it, than need it and not have it’.
Do I really need insurance though?
If you are, for example, contracting in an office with no public facing activities, you may be wondering whether you need insurance at all. But 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.
So what insurance do I need to take out?
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. As mentioned above, if you work in an office away from the public, there will be some insurances which will not apply to your business. 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:
This is probably the most likely type of insurance to be a requirement in your contract, and 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.
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. Therefore, whatever business sector you are in, if you have an end client, you most probably would want to look to obtain this insurance.
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.
If 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.
There are other types of insurance that may not be a requirement, but depending on the type of work that you do, and the sector you work in, could well be desirable. The main ones 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 covers 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.
If you are unsure about what type of insurance would be beneficial to you and your business, it is always wise to speak to an insurance broker for a professional opinion.
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