When starting out on your contracting or small business journey, you need to put the right insurance in place. Having the right insurance in place helps protect you, your business and your clients. Of course, this may all be new to you, so here I have covered the most common business insurances and what they are for. 
All new businesses need to be mindful spenders when starting out, that much is a given. However, cutting costs when it comes to insurance is not advisable and may be more costly in the long run. 
 
It is also worth noting that if you are a contractor, often your contract will specify that you need to have particular insurances. If you failed to have them in place, you would be in breach of your contract. 

Professional Indemnity 

Professional Indemnity (PI) insurance covers you if you make a mistake or error in your work that causes financial loss to your client. 
 
For example, if a project manager made an error on a project which resulted in a three-month delay, costing their client £400,000 in lost time, the PI insurance would cover defence costs and any liability up to the limit of the policy. 
 
These instances are rare, but all of us are only human and mistakes can happen. Having PI Insurance in place gives you and your client peace of mind. 

Public Liability Insurance 

Public Liability insurance provides cover in situations where a third party makes a legal claim against you for negligence resulting in injury or loss. The third party may be an individual or another business. 
 
Public Liability insurance supports you in making a defence claim and in paying damages if necessary. 
 
As a business, you are responsible for anything that happens to anyone as a result of your business, so Public Liability Insurance is essential. 

Employers Liability Insurance 

Employers Liability Insurance steps in in the event of an employee bringing legal action against you for injury or death sustained during their employment. 
 
Once again, the insurance supports you in making a defence claim and will pay out where necessary. 
 
Employers Liability Insurance is a legal requirement for any business with one or more employees (even if you only hire part-time or temporary staff). However, if you run a limited company and are the only employee with over 50% of the share capital, you are exempt from this. 

Next Steps 

Getting the right cover if vital. We partner with one of the very best insurance providers on the market – Qdos and can provide a discount on their premiums. 
 
If you want to know more about insurance and find out how to get that discount, get in touch with us at Effective Accounting. We have worked with contractors and small businesses for over 10 years, and our founder, Nicola, has over 15 years’ experience in the industry. 
 
 
 
 
Written by: 
 
Nicola J Sorrell -  
Effective Accounting 
 
Founder | Xero Champion | IR35 Expert 
 
 
Tagged as: Insurance
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