Becoming a contractor – know the risks

Soyou’ve decided to take the plunge and become a contractor; you’ve likely chosenyour business structure and a catchy name, set up your business bank accountand sorted your financial bookkeeping system, but have you considered the risksassociated with your new venture and what you can do to protect yourself and yourshiny new business should the worst happen? 

We’vecompiled a list of the most common risks associated with contracting and theinsurances which can be purchased to protect against them. 

Are youproviding professional advice or services?

Whetheryou are at fault or not there are times when a client may take issue with thework that you have done and seek compensation. Professional indemnity or PI insurance is designed to help youdefend any claims against you arising out of any negligent act, error oromission, breach of contract, libel and slander, and other civil liabilities,and pay the costs of any valid claim (up to the selected limit of indemnity)including the costs involved in defending any claim.

Is your business equipment protected from loss ordamage?

Your equipment is likely to be essential to yourability to perform your work and if anything were to happen to it, you wouldundoubtedly want to get it replaced as soon as possible. Many contractors optfor “All risks” contents cover meaning that anyrisk is covered unless specifically excluded, the main risks being theft ordamage. Another important factor for many contractors/freelancers is havingtheir contents covered both at their place or work and away from the premises.

Do you visityour client’s premises?

Imagine the scenario; you’re working from yourclient’s premises and someone trips over your laptop bag causing them aninjury, or perhaps you accidentally spill coffee on your client’s equipmentcausing permanent damage. 

Public and products liability insurance providescover for your legal liability to pay compensation (including legal costs andexpenses) for any accidental bodily injury or physical loss or damage toproperty in the course of your professional services, including liabilityarising out of products.

Do you employ anyone?

If you employ staff you are legally obligated to carryemployer’s liability insurance under the Employers Liability Act 1969.Employer’s liability provides cover for your legal liability to pay compensation(including legal costs and expenses) for any bodily injury, illness or diseasesuffered by an employee in the course of their employment.

What wouldhappen if you were injured in the course of your work as a contractor?

If you're injured as a result of an accident and areunable to work, then the chances are you'll be looking at a significantfinancial loss. Personal accident insurance can provide a lump sum or even aweekly income benefit for each insured person who suffers a bodily injurycaused by an accident.

Would you beable to defend legal actions taken against you?

In today’s increasingly litigious society, legalaction may be taken against you for many different reasons and arising out ofany number of different disputes (employment, breach of a restrictive covenant,tax, property, criminal investigations, motor prosecutions, investigation by aregulatory body, breach of contract, debt recovery…to name a few). 

Legalexpenses insurance provides cover for the potential costs of legal action broughtby or against you.

Whether you choose to take out just one insurance or apackage of insurances you should ensure you speak to a specialist broker like Bluefin Professions who understand the specificneeds of contractors.