Out of a group of over 1000 clients, contractors and consultants, 44% of respondents to a survey reported they’d been involved in a construction industry dispute, according to a report by Kenzie Consulting Group. As a self-employed contractor, you don’t always have the benefit of working for a company that will jump to your personal defense in the event of a dispute, meaning you need to organize your own defense if you hope to walk away from such incidents with your bank balance and reputation intact.
If you’re a self-employed contractor, you should arm yourself with the right insurance products to ensure you’re able to remain financially stable and keep working should one of your clients choose to raise an issue. That way, you’ll be able to move on to your next job or project and continue making a living while the insurance company deals with the awkward details of the claim.
But what insurance products are available for self-employed contractors? And which is right for you and your business? Let’s discuss…
What insurance products are available for self-employed contractors?
Professional Indemnity Insurance
Professional indemnity insurance is designed to protect freelancers and independent contractors in the event a client isn’t satisfied with the service that’s been provided. If you’re a self-employed contractor working on a construction project for a client, that client could claim they’re not satisfied with the quality of work that’s been done, or that you’ve made mistakes in your work that have cost them money – both of which could result in a legal case being brought against you.
If you make an error in your work, or a client claims you’ve made an error, professional indemnity insurance will provide you with financial assistance to cover legal fees, and compensation costs, and to generally help you survive in the event you’re not paid for your work when a claim is made. This insurance also covers you for professional negligence claims, in which it may be claimed you’ve caused serious financial setbacks as a result of your poor work, or have injured someone while carrying out your work. Interestingly, some professional indemnity cover can also protect you against defamation, in the event a client attempts to slander your name on a wide scale, resulting in you losing work.
The purpose of liability insurance is to protect you in the event you cause injury or damage to another person or property – both of which can easily occur during construction work. If you’re found legally liable, the insurance policy will cover your legal costs and payouts that may be demanded of you. But it’s important to note that liability insurance only covers accidental damage, not intentional damage. So if you’re found guilty of intentionally causing damage to property or injuring someone while on a job, you won’t be covered.
You may also hear liability insurance referred to as ‘Third Party Insurance’, as unlike many other insurance products, its key purpose is to pay third parties in the event of a successful claim, rather than the policyholder. Liability insurance is a good idea for self-employed contractors, as you’re regularly at risk of causing accidental damage or injury, it’s a useful policy to have for anyone that can be sued for damages or injury, which includes many small business owners of all kinds.
There are several kinds of liability insurance, designed to protect a wide range of people and businesses. But for self-employed contractors, a general liability insurance that covers the basics (discussed above) should do the trick.
You may see the term ‘Tradesman Insurance’ as you’re researching the different insurance products available to you. At face value, if you’re a tradesman, this sounds like the perfect choice, but tradesman insurance is actually a general package deal encompassing several forms of insurance you may find useful, often including the above. So if you’re looking for more of an all round insurance deal to protect you against different eventualities, tradesman insurance is well worth looking into, beyond individual insurance products. Just be sure you take an in-depth look into precisely what’s covered, in case there’s something missing you may wish to add separately, or that may lead you to choose a different insurance product entirely.
Contractors All Risk Insurance
Another insurance product for contractors that covers multiple bases, contractors all risk insurance protects workers and construction business owners against damage or loss that occurs on a building site. The phrase ‘all risk’ refers to the fact the insurance will also cover the cost of repairs to the damage or loss on-site, which is not covered by other insurance policies.
Generally, if you’re an independent contractor, contractors all risk insurance will also include contract works insurance, which covers independent workers against damage that’s caused to an ongoing project and the cost of repairs. This can be useful considering, as a contractor, you’re normally liable for any work that’s carried out until the project is finished.
However, when a construction company takes out contractors all risk insurance on behalf of its workers, this can also include other cover such as public liability insurance and employers liability insurance. You should always discuss with your insurance provider what exact cover they believe you will benefit most from before you take out a policy.
Why you should take out insurance as a self-employed contractor
Protect your income and assets
Many independent contractors rely on a steady stream of work to pay the bills. But this stream could be interrupted in the event of a claim being made against them by an unhappy client. If the case goes to court, as the contractor you’ll be expected to pay for legal fees to defend yourself and potentially cover the costs of damage or losses, if you’re found liable. This expenditure can financially cripple some workers, leaving them unable to provide for themselves or their families.
But with the right kind of insurance, you can cover yourself for these eventualities and continue your work safely in the knowledge that, if something does go wrong or a client is unhappy, you’ll be able to handle the consequences without losing cash.
If you’re an independent contractor, you’ll be well aware of the power of word of mouth. Many of your jobs may have come off of the back of a recommendation by a previous client for whom you did an exceptional job. But this stellar reputation can come crashing down if an unhappy client chooses to slander you. And in the modern age of social media influence, it doesn’t take long to ruin someone’s reputation, no matter the circumstances. But in the event you are taken to court by a client, having insurance in place guarantees you’ll have the financial means to defend yourself and a chance to restore your reputation should you be found not liable. Also, depending on the severity of the slander, you may also opt to counter-claim against your former client for defamation, though things hopefully won’t go that far.
It gives the impression to clients you’re a responsible service provider
“Fully insured” is always a comforting phrase to hear when you’re hiring someone to do a job. But even if that insurance has nothing to do with the client’s benefit, advertising that you’re an insured contractor gives off the impression you’re a hard-working and responsible professional, willing to go the extra mile to deliver an excellent service.
Choose a reliable and reputable insurance broker
With so many different products available, it can be difficult to choose the right insurance product for you as a self-employed contractor. That’s why, if you need a hand, it’s always wise to consult the services of an experienced insurance broker who can guide you on the best products for your specific situation.
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