(Updated 20th February, 2019) – You may already know, that operating a limited company can be the most financially beneficial method of running a business. Another widely known benefit is the minimal debt responsibility involved with a limited company. But did you know there are other ways you could become financially liable if something goes wrong?
There is still some financial risk involved when operating a limited company. Depending on the type of business that you offer as a contractor, and circumstances surrounding the operation of your limited company, unforeseen events could happen that may potentially make you liable for damages.
It is important to mitigate the risk of liability by purchasing business insurance. Business insurance is a key part of risk mitigation, and having suitable insurance in place will help you to limit the exposure of your business to financial loss and reputation damage. Contact us to find out more about insuring your contractor business.
In some cases, business insurance may be a contractual requirement, and Employers Liability Insurance is mandatory for a business that employs staff. It is good sense to assess risks that your business may be exposed to throughout the course of your limited company’s operation.
Such risks may include, but are not limited to:
- Clients experiencing a problem with the work you have carried out for them, due to your mistake or incorrect advice.
- You or any of your company employees experiencing injury or illness resulting from work.
- A member of the public having an accident as a result of something your business has done or failed to do.
- Your office equipment being accidentally damaged, lost or stolen.
- Having a personal accident on site that prevents you from being able to work.
Whilst you may take all the necessary steps to prevent the above events, unanticipated events sometimes cannot be avoided. Therefore, it is important to have business insurance in place to protect your business from legal action or loss of income, and to give you peace of mind.
Here are some common types of business insurance for contractors:
- Professional Indemnity Insurance protects against claims that are made against your company’s work. Many clients and agencies may insist that your company has this type of insurance in place before starting work for them, so it is a good idea to have this insurance from the beginning of starting your limited company.
- Public Liability Insurance covers you if a person is injured or their property is damaged by your company during the course of your business activities.
- Employers’ Liability Insurance is compulsory for Directors who have employees and covers claims made against your company by any of your company staff. There can be occasions when you may have staff but do not require Employers Liability Insurance.
There are other types of insurance that could cover you for a variety of circumstances, such as Personal Accident, Product Liability, Directors’ and Officers’ Insurance and more. Most of the time, the type of insurance you need will depend on your profession and the nature of your contractor business.
Business insurance, while not always a legal requirement, could save your limited company from being pursued legally in the unlikely event that something goes wrong. That is why it is important to consider business insurance when you set up your limited company. You can get business insurance at any time, but taking care of it at the beginning can eliminate the administrative burden and give you peace of mind.
Many contractor accountants offer a set insurance package, which may not necessarily suit your needs depending on your business. It may be more beneficial for you, therefore, to seek out an insurance provider that offers specific insurance packages that are tailored to your needs and profession. Your business insurance can also count as a business expense which you can claim back through your limited company.
UK Contractor Accountants Churchill Knight can help you set up your limited company. We have been helping contractors and freelancers since 1998, and our expert contractor accountants can take care of all of your invoicing, payroll, bookkeeping, and more for one flat monthly fee. Our all-inclusive limited company accountancy service can ease the administrative burden of running your own contractor business, and help you focus on doing what you do best.