Insurance provides protection for both contractor limited companies as legal entities and for the directors who work for them and own shares in them. There are multiple types of contractor insurance available which we consider in this article.
Yes. If a contractor limited company has no insurance policies to protect it, it (and its directors) could, depending on the agreement covering the work, be liable for compensation, losses, client costs, client legal costs, and claims for damages.
Contractor professional indemnity insurance covers against claims made by a client as a result of work carried out. Clients are entitled to approach a contractor for costs and damages if a mistake is made where the mistake causes financial or reputational damage. These claims can be made for up to 6 years after sign-off of work.
As most clients appreciate that contractor limited companies lack the funds to pay damages and other costs, they will normally insist on the presence of a professional indemnity insurance policy with cover of up to £1m (or higher, depending on the nature of the work).
To be covered for any claim, a policy must have been in place when the work that has given cause to a complaint was carried out.
Contractor public liability insurance provides cover in case someone working for a contractor limited company (including its director) accidentally injures someone else or damages their property.
Contractor public liability insurance is not compulsory. However, contractor limited companies and their representatives have a duty of care towards any other person and any property which may be affected when work is being carried out.
To be covered for any claim, a public liability insurance policy must have been active at the time when the injury or damage was caused. Cover is normally for £2m although some clients may insist on a higher amount prior to the commencement of work.
Contractor employer’s liability insurance provides coverage for contractor limited companies if one of their staff (for example, a substitute) is injured or becomes ill during or because of the work they have been tasked to complete. Contractor employer’s liability insurance is not needed if the only employee at a contractor limited company is the director who owns more than half of the share capital.
If the director of a contractor limited company is accused of not acting conscientiously, competently, or honestly during the execution of their duties, then they run the risk of being subject to claims made by regulators, creditors, shareholders, or any other affected person or organisation.
Director’s liability insurance provides cover if this type of claim is made.
If the income of a contractor limited company is substantially or wholly reliant on one person and that person becomes unable to work, an income security insurance policy may provide cover in these circumstances.
However, many contractors believe that income security insurance is as reliable as the now widely-discredited payment protection insurance and that investment in an income security policy does not always represent value for money.
Prior to taking out a contractor income protection policy, a contractor should check:
Contractor personal accident insurance provides weekly pay outs to contractors unable to work because of an accident at work. After all, if you’re unable to perform your contract the chances are you will loose it. Contractor personal accident insurance policies will generally pay a lump sum on death or permanent disability caused by an occupational accident.
Many contractor limited company directors will often enlist the support of their accountant, solicitor, or financial advisor in finding suitable policies in the first case. Prior to entering any insurance agreement, the Key Facts document provided by a potential insurer should be checked over by an advisor to check for efficacy.
Policies covering the contractor limited company should be paid by the limited company. Policies covering income security and personal accidents can be paid either by a director personally or via the company. Contractors should check with their accountant on a case-by-case basis however, in most circumstances, policies covering income security and personal accidents are an allowable business expense and should be paid by the limited company rather than using a director’s post-tax salary.
In this post we cover everything you need to know when appointing an accountant for your Limited company. Appointing an accountant can be a very important part of the process as can Appointing your accountant with HMRC as your “agent”.
Directors of contractor limited companies must be aware of their responsibilities to HMRC and Companies House. In this guide, we cover everything from what is IR35, a Director's role and also Contractor VAT.
It is important to know about the broad range of limited company contractor expenses that can be claimed back. This section covers Capital allowances for contractors, types of expenses you can claim back and Contractor expenses when working away from home.
Bookkeeping software is essential for providing estimates to clients, invoicing, chasing payment, accepting payment, receipt storage, and more. We look at the importance of keeping money aside for tax and slower trading periods, how to separate personal and business finances and keeping business records safe & accessible for inspection by HMRC.
There is a wide variety of ways in which a contractor limited company can market itself including a well-written CV, using a recruitment agency, online job boards, LinkedIn, networking, websites, and email marketing. Marketing gets a contractor in to see an interviewer who will eventually award the job. We look at the mindset of an interviewer, phone interviews, what’s expected at face-to-face interviews, and the increasing frequency of Skype interviews.
Contractor interviews are one of the most important aspects to winning business as a contractor. This resource will inform you for what you need to know about The mind-set of the interviewer, phone and face to face interviews and Skype interviews for contractors.
A contractor limited company pays its own taxes including corporation tax, Employer National Insurance, IS and VAT. There are schemes available from HMRC which allow contractors extra time to pay what they owe when money is tight. In this post we look at the tax burden faced by contractor limited companies.
Contractor limited company directors are required by law to complete a Self Assessment every year. In this post, we look at how to register and when the self assessment submission needs to be made by. We also examine tax bands for contractors, income tax, National Insurance and dividends.
Directors of contractor limited companies have multiple opportunities to efficiently structure how they pay tax. In this post, we consider salary and dividend splits, appointing family members, claiming back expenses from previous years, capital expenditure allowances, tax free savings accounts, special investment schemes, single premium investment bonds, and Members’ Voluntary Liquidations.
