What business insurance do contractors and freelancers need?

Chris Andreou

April 21, 2021

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Getting started with business insurance

As a self-employed person—whether you’re running a full-time freelance gig, or hustling on the side—you’ll need to think about the risks you face and whether business insurance could be a good idea.

In this article, our business insurance partner, Superscript, explains the covers you may want to consider getting.

How should I approach getting business insurance?

Whatever your freelance work consists of, there are different cover options available to match your unique set of risks.

A home-based freelancer, for example, may not see a need for public liability cover, which is designed to protect you against injury or damage caused to the public by your work. On the other hand, a freelance photographer, working with equipment, hazardous cables and lots of people, most likely will.

And a candle-making crafter may see no need for professional liability cover, which is designed to protect against financial damage caused by professional advice - but will probably want to opt for product liability insurance. 

While many insurance providers will offer different products under their individual names, for example, ‘public liability insurance’ or ‘professional indemnity insurance’, others will group basic covers under the umbrella term ‘business insurance’. 

Superscript does things a little differently, as we enable you to select from a range of covers to create a policy that meets your individual needs - and on a monthly subscription basis, which means that you can adjust and cancel covers as and when you need to.

This tends to be useful for those in project based work. For example, you may require public liability insurance for a few weeks, to cover an event, but you don’t necessarily want to pay for a whole year’s worth of cover.

Is business insurance a legal requirement for freelancers?

Business insurance isn’t a legal requirement in the UK, unless you hire employees - in which case, employers liability insurance is mandatory.

All other business covers are optional. However, you may find that some clients require you to have certain covers (professional indemnity insurance or public liability insurance are quite commonly required, for example).

In absence of this, it’s a good idea to weigh up the cost of getting cover against the risk of not having it in place, in order to decide whether a specific cover is right for you.

Contractor & Freelancer Insurance Guide

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Contractor & Freelancer Insurance Guide

6 questions to ask yourself

A simple way to start thinking about the cover you may need, is to ask yourself six questions:

1. Does my work involve in-person contact with people? 

If your work involves contact - even if indirect - with other people, you may like to think about public liability insurance, which is designed to protect you financially if you’re faced with a compensation claim as a result of someone being injured or their property damaged due to your work.

It covers you while working at your own premises and when working at a client site, or in public and is one of the most common covers for freelancers.

2. Does my work involve the selling or gifting of products?

If your work involves the selling or even gifting of products, you’ll want to consider product liability insurance (which, with Superscript, is automatically included with your public liability insurance).

It’s a common misconception that the manufacturer is liable for any product-related issues, but this isn’t always the case. If the manufacturer is based outside the EU, for example, it would not be liable - but you may well be!

3. Does my work depend on expensive tools or equipment? 

This is a very personal choice, but business contents insurance may be worth thinking about if your work is very much dependent on specific tools or equipment that you would have trouble replacing in the absence of insurance.

A freelance writer, dependent purely on a basic laptop, may not feel the need to get this cover, while a photographer, with expensive camera equipment, may find it necessary.

4. Does my work involve giving advice?

If your work involves any form of consultancy, advice, design or even healthcare-related services you may want to consider the benefits of professional indemnity insurance.

This particular cover is relevant to many freelancers, and includes defence costs related to a claim and compensation if your client suffers a financial loss as a result of your professional services.

5. Does my work involve working with personal information, or computers?

If your work involves any storing or processing of personal information, you may want to think about cyber insurance.

It sounds deceptively techy, but is actually relevant to any business (tech-focused or otherwise). Very few of us get by today without some form of technology at work, whether it’s in the form of websites, servers or basic online software.

Even for those with only a small IT footprint, cyber-attacks present a risk. Cyber insurance offers assistance in the instance of a data breach, hacking, cybercrime and the business interruptions these events may cause. 

6. Does my work involve use of media (e.g. photography)? 

If your work involves handling media content - for example photos on a website or social media, the accidental use of a trademarked image could lead to trouble down the line.

Media liability insurance, is designed to protect you in these situations. They actually happen surprisingly often - and can be a costly mistake to make. With Superscript, media liability cover is automatically included with the selection of professional indemnity insurance.

Contractor & Freelancer Insurance Guide

What's Inside:

  • What is business insurance?
  • What insurance you need
  • Legal requirements for insurance for freelancers
  • Legal requirements for insurance for contractors
  • How to find the best policy
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Contractor & Freelancer Insurance Guide

What's Inside:

  • What is business insurance?
  • What insurance you need
  • Legal requirements for insurance for freelancers
  • Legal requirements for insurance for contractors
  • How to find the best policy

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Contractor Business Services UK

Firstly, we'll start with the services that we provide which covers the critical things you'll need to start and operate your contracting business.

For those just getting started, we provide free company registration on Companies House. This is typically done within 24 hours of submitting your details to Forma. It can take under 5 minutes to provide all your details and we'll just need a proof of ID and proof of address for each of the company directors.

We cover all of your key company filing requirements like annual accounts, confirmation statements, corporation tax and ensuring you meet all filing deadlines.

We also help with your annual Self Assessment which is a requirement for all company directors.

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What are the advantages of contracting?

The advantages of contracting are:

  • Flexibility: Contractors have a lot more control over their work life often deciding when they work, where they work and how they work
  • Increased earnings: Contractors are often paid more due to their skillset and the flexible nature of their working relationships. Additionally, contractors who operate through their own limited company can benefit from tax efficiencies.
  • Greater development: Often working with multiple clients throughout their career, contractors are exposed to a lot of opportunities to develop their skills and build on their experience in their area of expertise.
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Can I get business insurance before registering my business?

Yes, you can get business insurance before registering your business.

When you're buying your policy, information that your insurer will ask for include your business address, trade type and actual or projected turnover. You may also be asked about your business structure.

Your insurer won't ask about your company registration number (CRN) or other business registration details. As such, you'll be able to buy business insurance while you're in the midst of settling the paperwork you need to set up your company.

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What is business insurance?

Business insurance is designed to protect you from the risks associated with running a business.

As a business owner (whether you're a sole trader, or are running a partnership or a limited company), the onus is on you to think about the risks you face as a business-and to get them covered.

While some risks and their accompanying covers are common to most businesses, others are more niche. The protection you'll need will depend on the risks your business faces.

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What type of business insurance do I need?

If you've hired at least one employee, employer's liability insurance is a legal requirement for most UK businesses.

And while other types of cover aren't mandatory, you'll most likely want to consider business insurance products such as:

  • Professional indemnity insurance
  • Public and product liability insurance
  • Business contents insurance
  • Cyber insurance
  • Management liability insurance
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Errors and omissions vs professional indemnity

Errors and omissions insurance and professional indemnity insurance are different terms used to refer to the same insurance cover. 'Errors and omissions insurance' is more commonly used in the US, while the term 'professional indemnity insurance' is typically used in the UK.

Professional indemnity insurance is designed to protect you against legal liability for breach of professional duty while carrying out your business activities. For instance, if a client believes that your service is inadequate or if you've made a mistake, the insurance will cover you against claims the client makes against you.

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What is an independent contractor?

An independent contractor is an individual who is engaged in a work agreement with a company or entity as a non-employee.

Factors that identify an independent contractor are:

  • They have a greater degree of control over their work
  • They offer a special skill set
  • They are able to get a replacement
  • They aren't entitled to employment benefits
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How much does employers' liability insurance cost?

The price of your employers' liability insurance will vary, depending on the number of employees you have, the industry you operate in, as well as the type and level of risk your business faces most often.

To give you a rough idea, here are a few examples of the approximate costs you can expect to pay:

  • According to AXA, 10% of their employers' liability insurance customers paid £42 or less for their cover in 2020
  • NimbleFins indicated that the average cost of employers' liability insurance ranges from about £61 per year for a single office worker, up to £213 or more for a trade worker for a small to medium-sized business in the UK.

To obtain a more accurate estimate, your best option would be to run an online quote with the insurance provider you're looking to purchase from.

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Do I need business insurance?

Having business insurance ensures that you and your business are protected should the worst happens.

These policies can help cover the costs that arise due to property damage or liability claims-without which you'd have to pay for legal claims and damages out of your own pocket. The costs can add up to a significant amount-and can be financially devastating for self-employed workers and small business owners.

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What does product liability insurance cover?

Product liability insurance covers compensation claims and legal fees if someone sues you because they've been injured or their property has been damaged by one of your products.

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What is an insurance broker?

Insurance brokers are professionals who sell various types of insurance coverage to clients.

Auto, home, health, life, property, and other varieties of insurance all fall under this umbrella. Some insurance brokers work independently and others work for brokerage firms; some deal with individuals, and some elect to work only with businesses.

An insurance broker's job is to help inform clients of how best to handle risk management. They help make it possible for individuals and companies to obtain and provide insurance for themselves, their families, their property, and their businesses.

Within the UK, brokers are regulated on the state level.

They're often required to hold a specialized license that can only be obtained after completing education and testing requirements. The information they learn during the period prior to certification allows them to guide clients and answer their questions without trouble. Brokers seek to help clients understand their liabilities and how to manage those risks most effectively.

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What is public liability insurance?

Public liability insurance covers your interactions with third parties (by this definition, anyone who isn't your employee).

If your business causes an injury or property damage to a member of the public, public liability insurance will cover you for the resulting legal and compensation costs.

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What is a Contractor?

You've been thinking about making the leap from employee to self-employed. If contracting is one of the options you're considering, this article is for you.

We'll run you through the basics, including what it means to be a contractor, how it differs from full-time employment and the type of business structures that contractors typically choose.

Contractors are self-employed individuals who provide services to a business. Generally, they're highly skilled, and are hired for projects that require specialist skills or to bolster a team during busy periods.

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Public liability claim examples

Public liability insurance claim examples:

1. Claims made against an electrician:

An electrician was engaged for the installation of a heating system in a commercial building. However, the installation was incorrectly done and caused a fire resulting in damages to the property, which amounted to £50,000. The electrician's insurance policy covered the cost of damage.

2. Claims made against a furniture assembler:

A cabinet that the furniture assembler had fitted fell from the wall, and caused injury to another contractor. The furniture assembler was required to pay just £250, as his insurance policy was able to cover the majority of the costs (£25,235).

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Can I get business insurance without a trade licence?

You can purchase business insurance before you obtain your trade licence. However, if you start trading without having the required licence, your policy may be deemed invalid.

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What is a contractor?

A contractor is a professional that provides skills and services to a specific client under set terms. The terms can be for a set number of hours, a certain time frame or duration of a project.

A contractor is responsible for their own dealings and has discretion over the work they carry out.

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19 Places to Find Contractor Jobs & Roles

When you get into contracting, it can get stressful when your project end date is just around the corner and you haven't secured your next role. This amps up even more once you finish a contract and you're looking for your next gig.

As a specialist contractor accounting business founded by contractors, one of the key questions we get asked is about where to find roles. So, we decided to compile a list of some of the best contractor job portals, platforms, recruiters and consultancies.

If you have anything else to add then please let us know at info@goforma.com.

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How much does professional indemnity insurance cost?

The cost of a professional indemnity insurance policy depends on several factors. As with other types of insurance, insurers will calculate the price of your professional indemnity insurance (your premium) based on a number of things, including the type of business you run and the level of cover you select.

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What is employers' liability insurance?

Employer's liability insurance is designed to cover workplace injury or property damage claims made by employees. It is the only business insurance required by law for businesses with one or more employees.

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How to Become a Contractor

So, you're thinking of becoming a contractor.

There's probably one of three reasons driving this:

You've received a Job Offer

You've just received a job offer, and now need to decide on whether to set up a limited company, umbrella company or become a sole trader (or you may not have the choice in deciding).

You're in the right place.

This guide will walk you through the best company structure for you, accounting support, VAT, business services you need to consider and finding new opportunities.

You want to increase your pay

You'd like to increase your pay by switching from permanent roles to interim/ contractor roles.

Contracting can be very lucrative.

You'll need to be comfortable with a certain level of risk (short notice periods), increased monthly admin (as a Limited Company) and less benefits than being an employee (paid leave, sick days).

However, you'll earn more, get greater flexibility and hopefully grow a consulting business.

Project Flexibility

Getting multiple requests for your services? Amazing.

Setting yourself up as a contractor through a Limited Company means you can start expanding your client base rapidly and work on different projects a few days a week.

You can still set this up as a current PAYE employee of a company, and this can be a great stepping stone to launching your own business.

Let's talk about the right business structure for you.

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Contractor & Freelancer Insurance Guide

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