As a sole trader it makes good sense to protect yourself against the unexpected. It could be a legal requirement; if you employ staff, for example, you need Employers Liability Insurance as a minimum. Insurance cover is risk management against potential liabilities in the form of Professional Indemnity, Public and Employers Liability and loss of income in the case of Personal Accident or problems with essential Business Equipment that prevent you from working.
It is important to understand and accept the financial risk you may incur through your work. You should consider the following questions carefully:
- Do you provide professional advice?
- Do you visit clients' premises or do they visit you?
- Do you employ anyone?
- Would your income stop if you were injured at work?
- Would your work be interrupted if your equipment was damaged or stolen?
If your answer is yes to any of these you are potentially exposed to risk.
The importance of effective insurance
If you fail to put effective insurance in place you could face potential liabilities for all costs including legal, compensation and defence of any claims made against you. You may suffer loss of income if you have an accident at work or important equipment is damaged or stolen. The real value is the reassurance that unanticipated incidents can be dealt with while you continue in business or recover from an accident.
Professional Indemnity Insurance
This provides protection in the event of claims made against you as a result of allegations of professional negligence. Cover includes legal defence costs and any damages awarded. Claims for negligence can be made against any business providing professional services. While you may never expect to make mistakes or errors whilst contracting for a client, they are within their rights to make a claim against you for negligence up to 6 years from the date that the services were provided. For this reason many clients will insist you have appropriate insurance in place from the outset of an assignment and will probably make this is a contractual requirement.
A standard figure for cover is usually £1 million. Certain clients may request different levels dependent on the services being provided and/or the size of the client.
Once the services are complete most insurance policies will cease to cover you for any potential claims arising as a result of those services (including defective work). It is therefore advisable that you speak to your insurance broker about arranging any relevant run off cover.
Run-off Cover is insurance that remains in place even where the services are no longer being provided. As claims can be made after the services have been provided run-off cover is necessary to protect your business in this event.
Public Liability Insurance
Public Liability Insurance provides protection against claims for liability in respect of accidental bodily injury to third parties, or damage to third party property arising in the course of your business activities.
Although Public Liability Insurance is discretionary it is worth noting that you have a duty to protect anyone who might be affected by the provision of your services. If someone makes a claim against you and you are found legally liable to them for compensation, your insurers will be able to cover the majority of the claim rather than your business having to find funds to cover the entire liability.
A standard figure for cover is usually £5 million. Certain clients may request different levels dependent on the services being provided and/or the size of the project.
Employers’ Liability Insurance
Employers’ Liability Insurance covers claims by employees in respect of injury or disease arising in the course of their work and for which you are responsible. Employer’s Liability Insurance is a compulsory insurance policy that all business owners must have if they have any employees, although there are a few exemptions as set out in the Employers’ Liability (Compulsory Insurance) Act 1969. It covers claims being made against you by your personnel and will enable you to meet the cost of compensation for any injuries or illness caused during an assignment.
£5 million is the minimum limit required by law although most policies will give £10 million as standard.
Personal Accident Cover
If you are injured in a work related accident and are unable to work then you are likely to suffer financial loss. As a Sole Trader your livelihood generally depends on your ability to carry out the work you have been contracted to undertake.
Personal accident cover helps to ease the financial exposure associated with occupational accidents. You generally pay a monthly premium that usually remains the same during the length of the policy. Regardless of blame, personal accident cover will usually pay you a weekly benefit while you recover from your injury. In addition, lump sum payments may also be available for death or permanent disability resulting from an occupational accident.
Business Equipment Insurance
Damage or theft of essential equipment can threaten your ability to complete a contract satisfactorily. Taking out insurance to cover your business equipment means you’ll have peace of mind that if it is damaged or stolen you’ll have the finance to replace it with minimal disruption to your business. Imagine a situation where you lost all or part of your business equipment and ask yourself the following questions:
Do you have sufficient funds to replace the equipment immediately?
How much income will you lose while the business equipment is unusable?
Should you be unfortunate enough to have your equipment stolen or damaged, without business equipment insurance you incur the unanticipated cost of repairing or replacing it. This could have considerable financial implications for you.
Business equipment insurance will cover the equipment and tools you use for your business against damage, loss, destruction or theft. Sometimes you may have to leave equipment on work sites that are particularly vulnerable to theft and vandalism. It is reassuring to know that equipment under these circumstances could be replaced and paid for by your insurer. Arranging the right business equipment insurance is vital.
Assessing your specific insurance cover
Insurance packages differ from business to business, sector to sector, and can be tailored to suit your requirements. If you feel you would like some more detailed personal assistance, Brookson Insurance Services can provide you with advice and information specific to your circumstances. We offer an exceptional insurance package through our insurance partners, Kingsbridge Contractor Insurance, covering all of these key elements.