If you carry out your contract work on client sites, or clients visit your premises, you should consider taking out public liability insurance. This will cover you against third party claims for property damage or personal injury.
Although not legally required, public liability insurance is often required by clients and recruiters before a contractor can start work.
What is public liability (PL) insurance?
In a nutshell, public liability insurance covers businesses against third party claims for:
- Personal injury.
- Property damage.
- Legal costs and any compensation.
If you are a contractor, here are some example scenarios where public liability cover would come into play:
- You wire up a new server, but accidentally damage some peripheral equipment in the process.
- A client visits your office to discuss a project but trips over poorly stacked storage boxes, resulting in an injury.
Why would a contractor need public liability insurance?
Unlike Employers’ liability insurance which is mandatory (if you have employees), there’s no legal obligation to take out PL insurance.
However, there are several compelling reasons to do so:
- Clients often insist that contractors are ‘adequately insured’. This means that your company has a specific amount of Professional Indemnity (PI) and Business Liability cover in place.
- If you’re taking out Professional Indemnity insurance, insurers often provide business liability for a small extra fee – perhaps a mere £100.
- If you hire other people to work for your company, then they could be responsible for actions which result in a public liability claim against your business. So you should take out a policy if you have employees.
- Ultimately, you will have the peace of mind that you are covered in the unlikely event that a claim is made against you.
- You are covered for the costs of defending the claim, together with any damages. And the cost of cover is inexpensive.
How much does it cost?
Business liability insurance, in general, is very competitively priced. A small business could take out cover for under £5 per month. Premiums are calculated according to various factors, including:
- Your turnover – larger businesses have more scope for claims to be made.
- The type of industry you work in – the risk profile varies enormously between types of business.
- The location of your business – home office, shared office space, or large premises. It all depends on your profile.
- How much cover have you chosen – typically £5m or £10m.
- Your past claims record: You are viewed as a higher risk if claims have been made against you.
Things to look out for when comparing quotes
- Specialist insurers typically provide £1m of PL cover, which can be increased to £5m or even £10m. A limit may also be specified by your client as a condition of the contract.
- You’ll usually find PL bundled with EL (Employers’ Liability) cover – and typically included as an option when you apply for a Professional Insurance policy.
- If you purchase all three policies together, you will save money compared to buying standalone policies.
- You can take out a PL policy on a standalone basis if you don’t need EL cover. Check the total costs of all your combined quotes, as – once again – a ‘package’ may be cheaper.
Public liability insurance FAQs for contractors
Do I need public liability insurance if I work remotely?
If you work entirely remotely and never attend client sites, the risk is significantly lower. However, many agencies and clients still require public liability insurance as a standard contractual condition, regardless of actual risk.
Do agencies require public liability insurance for IT contractors?
In many cases, yes. Agencies often require contractors to hold a minimum level of business insurance, including public liability, before allowing them to start an engagement. This is typically specified in the contract terms.
Is public liability insurance relevant for inside IR35 contracts?
Generally, no. If you are working inside IR35 via an umbrella company, you are covered under the umbrella’s insurance policies. Public liability insurance is primarily relevant when contracting via your own limited company.
Does public liability insurance cover mistakes in my work?
No. Public liability insurance covers physical injury or property damage. Claims arising from mistakes, negligence, or poor advice are covered under professional indemnity insurance, which is usually more relevant for IT contractors.
What level of cover do IT contractors typically take out?
Most IT contractors take out between £1m and £5m of cover. However, larger organisations and public sector clients often require £5m or £10m as a minimum.
Can I rely on my client’s insurance instead?
No. A client’s insurance will not cover your actions as an independent contractor. If a claim is made against your business, you would be personally responsible unless you have your own cover in place.
Is public liability insurance worth it for low-risk contractors?
For many IT contractors, the actual risk is low. However, the cost of cover is relatively small, and it is often taken out to meet contractual requirements rather than to cover day-to-day risk.
How to get a public liability quote
Visit our long-term insurance partner, Qdos, for a quote and to find out more. Get cover for as little as £4.58 per month.