As a professional contractor, you should ensure that your business is adequately insured – this may be required by your clients, and will also offer peace of mind.
If you are starting a new IT contract, chances are the client or recruitment agent will require you to have a certain level of insurance cover in place before you can start the assignment.
Here are the main types of business insurance you may encounter as an IT contractor:
Professional Indemnity Insurance
Many clients now insist that their contractors have sufficient Professional Indemnity Insurance cover in place. PI insurance will cover you for mistakes you make at work and claims for negligence, loss of data or documents, unintentional infringement of intellectual property, and other eventualities.
If you are the subject of a claim from a disgruntled client, PI insurance will cover the costs of legal representation, as well as any damages and costs you are subsequently found liable for.
Employers’ Liability Insurance
Although employers’ liability insurance used to be a mandatory requirement for all businesses, the Employers’ Liability (Compulsory Insurance) Act 1969 was amended in 2005 to exempt limited companies with a sole employee (who owns at least 50% of the shares) from the terms of the Act. EL insurance covers the company’s employees in case they are injured at work, and directors are highly unlikely to sue their own company’s in the event of an accident.
Public Liability Insurance
Public liability insurance will cover your company in case you are sued by a member of public who suffers an injury as a result of action you have taken during the course of your contract work. It will also cover the cost of making good any damage you cause to property, e.g. damaging computer equipment on a client’s site.
You will find that most suppliers can offer a ‘bundle’ of insurance cover, to include employers’ liability, public liability and Professional Indemnity insurance. You can then add or remove any number of additional extras, such as equipment cover.
Tax investigation insurance will cover the costs of professional representation in the event that you are investigated by HMRC. Given the uncertainty the IR35 legislation has caused within the contracting community since its implementation in 2000, we recommend taking out cover to provide piece of mind. Annual tax enquiry cover from the leading supplier, Qdos, is a mere £99 per year.
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