Are you a contractor that is looking to work with a new client? If so, it is no secret that certain safety nets will need to be in place. These should be set up before you go ahead. When insurance policies cover you, it means that these protect you. The protection is there if a third party makes liability claims against your business. It will give you peace of mind should such cases ever occur. Professional Indemnity insurance (PI) is one such policy that is more or less key for any professional. Below are a few of the key reasons why you may need this.
Four other policies that are specifically for contractors and are worth considering are:
- Contractor Mortgage
- Critical illness
- Income protection insurance for contractors
- Relevant Life Insurance
THE FIVE KEY REASONS WHY YOU MAY NEED PROFESSIONAL INDEMNITY INSURANCE
1 Professional negligence
First and foremost, professionals have a duty of care. They need to make sure that their client does not suffer as a result of the service that they provide. Should a client suffer financial losses as a result of a professional having acted negligently, they can bring legal action for their losses. As a result, the professional may be liable to pay. Taking out Professional Indemnity Insurance will cover you for any legal fees when you defend such an action. It will also cover you for any damages that you may be liable to pay as a result of the proceedings.
2 Contractual requirement
Contractors themselves will decide whether they want to take out certain contractor insurance policies. However, some contracts request that certain protection has to be in place. Some clients may ask that you take out Professional Indemnity Insurance cover. This will be part of accepting the contract. When you do so, it will allow for a mutual understanding that both parties are secure. This will be in place should a potential liability claim arise. In turn, this gives clients the confidence that you run your business on a professional basis.
3 Mistakes can happen
Most contractors will be confident in their own experience and the quality of their work. It may lead some to assume that they will never need to claim on Professional Indemnity Insurance. However, it is by their very nature that mistakes are hard to predict, and they do happen. Should the worst occur and you make a mistake in the service provided to clients, Professional Indemnity Insurance will prove to be invaluable.
4 Other cover
The main driving factor in taking out Professional Indemnity Insurance is the potential for mistakes in advice or inadequate service. What’s more, most PI policies will cover some often overlooked mistakes. These include unintended infringement of Intellectual property rights, accidental defamation.
5 Peace of mind
The Professional Indemnity Insurance cover is set in place to give you peace of mind when you provide your services. If you have this safety net, it gives you the vital cover that you need. It will essentially take the uncertain and potentially very high costs of legal fees and your potential liability. It will then replace it with a fairly modest cost of an insurance premium. In turn, this will create one less worry for you and your business.
A BRIEF LOOK AT WHAT PUBLIC LIABILITY (PL) INSURANCE IS. ALSO, WHETHER YOU NEED IT. PLUS, A LOOK AT OTHER RELATED CONTRACTOR INSURANCE POLICIES
What is PL insurance?
Public liability insurance is a policy that covers an insured business. This cover is if a third party makes allegations against them. The third-party could be a member of the public, a customer, or a client. The claim could suggest the insured business has caused bodily injury or property damage during the course of their services.
The policy, in effect, covers any legal costs and any compensation payments if the policyholder is liable.
Do I have to take out PL?
PL insurance is not a legal requirement. However, this should not undermine its key importance. In most cases, businesses buy PL insurance if they tend to come into contact with third parties. It could include shop owners, restaurants, hairdressers, etc. What’s more, it could also include self-employed individuals who carry out work with clients. Indeed, this is true of contractors who work at their clients’ sites. Its key importance will reflect by the regularity with which the policy is required under the contract.
In general, contractors may consider taking PL out as part of their contractor insurances. In fact, many insurance providers will package this up with PI as part of the contractor insurance.
Employer’s Liability (EL)
PL does not, however, cover a business should an employee suffer an injury, illness, or accidental death and believes the employer is responsible. Employer’s liability (EL) insurance will cover these disputes. EL covers the policyholder where employees bring claims against them. The claim would allege that the policyholder has breached the duty of care it owed them. For most businesses with employees, EL is a legal requirement compared to PL, which is not. Given the similarities in the nature of disputes insured, allegations of illness, injuries, etc at the hands of the business, businesses usually buy both EL & PL in conjunction with one another.
In general, due to not employing external staff in most cases, most contractors will usually not take EL insurance out as part of their contractor insurances.
Products liability insurance
Besides EL & PL insurance, most liability policies will include Products Liability. This insurance will usually cover similar risks to the PL, allegations of illness, injury, or death sustained by a third party. The claim would be where the cause of the said losses is by physical products that the policyholder has built, altered, or sold. Should the end clients suffer an injury as a result of any products made by the contractor, the policy would cover them in legal defence costs. It would also cover them in the potential for compensation, which could be very costly.
Claims occurring policy
When a company takes out any of these policies, they operate on a ‘claims occurring’ basis.
What’s more, this means these policies will insure incidents that occur during the period of insurance. It is regardless of if the claim is made sometime after the policy expires. Please note this differs from Professional Indemnity Insurance. It operates based on a claim that is made / reported during the policy period rather than when the claim occurs.
To sum up, when you run your own business it is good to have peace in mind. Professional Indemnity insurance ought to be a thought from the outset. What’s more, when you have appropriate insurance for your business this comes with the knowledge that you have cover should the unfortunate occur. Please follow this link If you would like to receive a free quote for any of the above.
Link to Contractor Advice UK group on LinkedIn https://www.linkedin.com/groups/4660081/