Almost 15% of the entire UK workforce now work for themselves - almost the same amount of people working in the public sector - and those numbers are only growing. IPSE's latest study showed that the number of self-employed people in the UK is the highest it's ever been (a whopping 5 million), despite the looming changes to the off-payroll rules, lengthy Brexit negotiations, and, of course, the coronavirus pandemic.
While COVID-19 has placed us in an unprecedented situation globally, previous periods of economic uncertainty have proven that we can expect an increase in insurance claims. You, like many businesses, may be tightening up on expenditure, and feel that not renewing your business insurances is one way to save cash; this could prove counterproductive.
There are multiple reasons why it’s important, perhaps now more than ever, to make sure your business is covered. However, it can be unclear what insurances you need and why.
What business insurances should I have as a contractor and why?
Professional indemnity Insurance
Professional indemnity insurance, often referred to as PI, is probably the first thing that comes to mind when you think about business insurance. Clients will usually set a minimum level of indemnity as a contractual obligation anyway, so making sure you have this particular cover puts you in a better position to win work (something that’s become tougher than normal during lockdown) from the off.
Its main job is to protect you should one of your clients allege that you made an error or omission in the services you provided to them. It’s a safety net that protects you from the costs associated with making a mistake - something that can be crippling to a small business – and provides cover for compensation, or damages payable, to rectify errors. Most importantly, however, it protects you from jobs you’ve completed previously.
Many businesses are looking for areas to recoup money to offset losses caused by the lockdown. There may have been a small disagreement or mistake made months or years ago that a client didn’t feel was worth perusing, but they now have time and need the cash. This isn’t a particularly pleasant prospect to consider, particularly as building good working relationships with clients is part and parcel of making your living. However, protecting yourself against a worst-case scenario is paramount in the current economic climate.
It’s also worth bearing in mind that PI works on a claims-made basis, meaning if you take out cover now, all previous work is covered (provided a claim hasn’t already been made against it by a client). On the flip side, if you cancel a PI policy now, you won’t be covered for a claim even if you carried out the work while insured.
Personal Accident Insurance
Another unfortunate by-product of the current lockdown is widespread cost-cutting. Inevitably, this leads to a stretched workforce and a shortage of good quality equipment. Add in pandemic-induced anxiety, disturbed sleep, and general brain-fog and the risk of physical injury in the course of work – particularly in manual industries like construction, engineering, and the energy sector – is suddenly much higher.
It’s reasonable to anticipate a rise in accidents, which is where having personal accident insurance can offer a lifeline to contractors that fall foul of an incident at work. One of the biggest risks of self-employment is not being able to work; PA provides financial support should you sustain an injury that prevents you from providing your contracted services, and usually includes a lump sum pay-out should an accident result in disablement or death.
Public liability insurance can also come into play here. A good PL policy will safeguard you financially from defence costs and reparations should you cause accidental injury to another person or even unintended damage to equipment or property - including third-person damage.
IR35 tax investigation insurance
The private sector IR35 reform has dominated contractor news feeds since it was announced back in 2018. Although the roll-out date has been postponed to 2021 (which you can read more about here), it’s more important than ever to make sure you’re covered should you fall foul of a claim.
Despite the reform delay, HMRC has hinted that compliance activity will increase before that date. “There will be a need to recoup as much tax revenue as possible to repair the huge dent in the Treasury’s coffers caused by COVID-19,” says Andy Vessey, Head of Tax at Kingsbridge. “We may well see HMRC IR35 compliance activity ramped up in 2020/21 because anticipated PAYE and NIC receipts arising out of the operation of the off-payroll rules will need to be recovered elsewhere”.
A good IR35 insurance policy will shield you from the costs of an investigation by HMRC should you be asked to prove that you are truly self-employed. An IR35 enquiry can take years to close and can become very costly in that time; paired with any tax debt you may be found owing, an investigation can be crippling to a small business. It’s also crucial you understand your IR35 position with every contract you take on - getting a professional contract and working practices review is pivotal to making sure you stay on the right side of the legislation.
A good policy will include an IR35 status review, as well as cover unpaid tax debts, interest, fines, and legal fees, and will flex with the reform roll out to cover the contractor, recruiter, and end client for all of the above.
Where can I get contractor business insurances?
Contractor insurance specialists like Kingsbridge offer comprehensive, competitive insurance packages to protect you against all of the above potential risks made even more potent by the coronavirus pandemic.
Alongside professional indemnity, public liability, and personal accident insurance, insurers worth their salt will offer add-ons like legal expenses and cyber liability for further assurance. Market-leading products like IR35 Protect are also worth researching to make sure you’re getting the very most for your money, which is more important than ever in today’s uncertain climate.
For more information feel free to get in touch with our relationship manager – Joey on 01242 809 310 or email@example.com