Insurance
When working for a large company, their insurance will foot the bill in the event that a claim is brought against you relating to your professional conduct. Going it alone does not afford the same protection. Take note: even if you are working under an agency contract, the agency is unlikely to cover you in the event of a claim. As a contractor, you must pay for legal costs and any compensation awarded to the other party. They could also claim against you for loss of profit arising from your alleged mistake.
The thought of a hefty legal bill is naturally a worrying one, particularly if you are starting out on a new business venture; however, there are steps you can take to protect yourself.
Professional Indemnity
Professional Indemnity cover is, quite simply, a must for contractors. Bear in mind, too, that your client is likely to check if you have it. This pays your legal costs in the event that a claim is brought against you in respect of your work and you wish to defend it. It also extends to paying damages to the claimant if awarded.
Public Liability Insurance
This covers you for accidents or damage arising from your work, for example, if a piece of your equipment on client property causes injury to an employee there.
Tax Protection
An Inland Revenue investigation can generate considerable costs to the taxpayer. Tax Protection covers you in this event. Some insurers also offer specific insurance cover for IR35 liabilities, which are particularly pertinent to contractors.
Employers Liability Insurance
Even if you are a contractor only employing yourself, you are likely to need employers’ liability insurance cover. Your contracts will probably have a substitution clause stating that you have the right to substitute another representative of the company to provide services on your behalf. If you do not have employers’ liability insurance you will be breaking the law if you do contract somebody else to do a job. It can be difficult to establish whether someone working for you is an employee or self-employed, so don’t take the risk and get cover.
Income Replacement
If you are ill for a period of time, an income replacement policy will pay you a regular monthly amount during your illness, allowing you to maintain your normal standard of living. Serious accidents or illnesses can also be covered under an income replacement policy, as some policies can cover your income until your retirement. The benefits will also be tax-free if you pay the premiums personally.
Critical Illness Cover
Because you work for yourself, a long period of critical illness could have disastrous financial consequences for you and your family. Unlike traditional life insurance, which only pays out in the case of death, Critical Illness Cover will pay out on the diagnosis of a range of serious illnesses, including a heart attack, stroke or cancer. Typically, you will be paid a lump sum, which could then be used for a period of convalescence or to make changes to your house. The cover is arranged by a monthly premium and is often taken out at the same time as Permanent Health Insurance.
Legal Expenses cover
If, on the other hand, you wish to bring a claim against someone you have worked with, legal expenses cover will pay your costs.
An insurance expert should be able to advise you on the particular insurance needs of your business and some insurers will “package” different forms of cover for a competitive price.
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