Contractor insurance: Choosing the right cover for your risks

Also referred to as PL insurance and PI insurance, they’re both great options for contractors. Job-related risks may seem small but can end up costing massive amounts of money. Contractor insurance needs to be tailored to your field of work. You may even want to take out two covers.

What is public liability (PL) insurance?

PL insurance protects you if a client or member of the public is injured or their property is damaged, and the incident is related to your services. It covers you for legal costs and any compensation due as a result of the injury or damage. If someone claims against your business, and it could be argued that you were responsible, you will be liable to pay. Public liability insurance is a safety net – you can rest easy knowing you’re covered should anything happen.

Let’s say you’re a contractor installing new hardware in a client’s office. While you’re working, you accidentally knock over a vase. The client runs towards the noise of the glass breaking without looking where they’re going. They trip over your drill’s power cable – right onto the broken glass. A hospital trip later and they want to place the blame on you. It can be argued that you’re at fault, even though they didn’t look where they were going. With public liability insurance, any legal and compensation costs that you must pay are covered.

See also: About limited companies

Do you need PL insurance?

It’s not a legal requirement, but it can protect you against costly compensation claims and legal fees.

Even if you never need to use the insurance, the knowledge that you’re covered will give you peace of mind. In some instances, a client may even require you to have public liability insurance before they will work with you.

If you work with the general public in any way, you should consider taking out cover. It’s often used by hairdressers, shop owners, restaurant owners and tradespeople – anyone that deals with other people daily.

What is professional indemnity (PI) insurance?

PI insurance protects you from any costs that arise if a client claims they’ve lost money as a result of work, advice, or service you’ve provided. Even if you aren’t at fault, an unhappy client can still make a claim, and you’ll have to fight it. Having professional indemnity insurance means your legal defence and any compensation costs will be covered.

One example of a claim would be if you’re providing IT consultancy to a company and you advise them to switch to a new web hosting provider. As soon as it’s migrated, the provider goes down and the company’s site is offline for a day. It’s a busy website and the primary source of their income. They blame you for loss of revenue. It wasn’t directly your doing, but you’ve still got to fight the claim. Professional indemnity insurance will cover your legal costs and pay the client should they be granted compensation.

Other incidents that PI insurance covers includes:

• Professional negligence – mistakes or bad advice
• Unintentional confidentiality breach – sharing private information without permission
• Unintentional copyright breach – using a client’s intellectual property without permission
• Defamation – damaging reputation through false comments
• Loss of money, products, documents and data that are your responsibility

Do you need PI insurance?

If you provide any form of advice or professional services, then professional indemnity insurance will benefit you. For some professions it’s compulsory – if you’re a chartered accountant or surveyor, PI insurance is a regulatory requirement. Other occupations that should consider getting coverage are:

• Business consultants
• Financial advisors
• IT contractors and consultants
• Architects and engineers
• Creative professionals such as designers and photographers
• Journalists
• Teachers and tutors

PL insurance vs. PI insurance

Both PL and PI insurance play a part in providing complete cover for any incidents that may occur. Public liability insurance is more of a general cover. It’s reasonable to expect anyone to look out for the safety of other people and their property and be liable to compensate any injury or damage. PL insurance exists to cover any costs from general incidents such as slips, trips, falls and property damage.

When you’re providing professional services, it’s again reasonable to expect a certain level of quality from your work – you’re an expert in your field. If you make a mistake or provide poor advice that leads to the loss of your client’s money, they can lay claim against you. This is what professional indemnity insurance covers. This type of cover is essential to contractors – claims are often intangible and can quickly get costly.

Insurance policies vary, and your needs will always depend on your field of work. Insurance premiums and coverage amounts change depending on the risk level of the services you provide. Get in touch with an expert for whole of market, affordable insurance advice.

Our expert advisors can help you make the right decision. Get connected with our team at contracting@sableinternational.com or give us a call on +44 (0) 20 7759 7530