Contractor Insurance: Mandatory or Not Mandatory?

‘It’s better to be safe than sorry’ is one of those patronising comments that people say as a bit of a cop out when attempting to instil wisdom into others (along with ‘better late than never’, and strangely, ‘a bird in the hand is worth two in a bush’). The meaning of such a saying however, as much as it is an annoying concept, is actually very true, and concerning insurance has a resounding message. Insurance policies are, although short term hindrances to our wallets, very important and potentially crucial forms of cover, especially concerning our finances.

Concerning contractors, and primarily contractor insurance, the importance of certain policies being in place is highly significant. Often, contractor insurance must exist before any form of work or contract can begin, the policies being mandatory for limited companies in a number of cases.

PI Insurance

As a policy that is essential to modern day UK contractors, professional indemnity insurance is a great example of an insurance product that is very often a contractual obligation, therefore mandatory for a limited company to hold. The question, ‘Is PI Insurance mandatory?’ is often asked by upcoming contractors and those new to the field, and the answer is always the same. Although obviously each profession differs, the need for PI Insurance will be made clear in a proposed contract provided by a client. This being said, even if the existence of professional indemnity insurance is not clearly stated, when it comes to covering professional aspects such as IR35, it is always an important form of back up protection.

Professional Indemnity

When it comes to important small business insurance policies, there are obviously some that are more versatile than others. For contractors, cover such as PI Insurance offers limited company contractors a worthy safety net when it comes to company finances, providing full indemnity concerning costs made due to any claims brought about by professional negligence.

Professional negligence ranges from spilling a cup of coffee over a years’ worth of important documents, to deleting a database holding masses of company accounts. Basically, the professional indemnity that is covered by PI Insurance as a policy is the name given to any action made by the policy holder that results in a claim of liability being filed against them.

Staying covered is vital to contractors, because as they are sole traders and very much company owners, they are 100% liable should any misfortune occur that could results in a financial claim. Because contractor insurance is so important to contractors, questions such as whether policies are mandatory or not are valid questions that should be answered.

Here at Qdos, if any insurance related questions exist, we implore that you call us on 01162690999.

By:Sam Greenwell

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