What Insurances Does a Contractor Need? - EL/PL

Employers Liability and Public Liability Insurance

Public liability is a commonly purchased insurance policy sought by any business, freelance contractors included. It reactively covers a policy holder for claims made against them whereby it is accused that they have inflicted personal injury or property damage.

Public liability closely associates with Employers liability, but may be acquired as a standalone policy if an individual has no necessity to cover employees.

In an event of a claim made by a third party, Public Liability will finance the legal defence involved with the claim, and pay for any damages of which the policyholder is found liable.

Obviously the nature of an individual’s work will influence the likelihood of facing such a claim. A self-employed individual mainly working in an office environment, for example, will be much less likely than a builder to cause damage or injury.

Having said this, an IT contractor could be one spilt cup of boiling coffee or one stray wire away from facing a claim made against them. In this respect, it’s important to acknowledge the need for this policy across all sectors. There is a vast range of existing ELPL policies to accommodate the differentiating requirements of individual trades.

In terms of levels of cover, recommended policies start from £1 million of cover, with £2 and £5 million also available. Customarily, freelance contractors will be required to have a £1 million level of PL cover in place.

Employers Liability is sold in conjunction with Public Liability and cannot be offered as a standalone policy, and is a fundamental option for anyone operating through their own Limited Company with employees.

This insurance covers claims whereby employees have been injured or sustained a fatality. Not all contractors are obliged to hold this policy, but a vast majority will be required to have it in place via contractual terms or law.

In the event of an incident injuring, or causing the death of, an employee, Employers Liability insurance will firstly finance the required legal defence of said claim. In the event of the policyholder being held accountable for the incident, the cover will then compensate them up to the limit of indemnity stated on the policy.

All Employer Liability policies are obligated, by law, to entail a minimum limit of indemnity of £5 million based on any one claim. It is, however, a common industry standard for the cover to hold a £10 million limit.

It is also well worth noting that both Public Liability and Employers Liability operate on a ‘losses occurring’ basis. This means that an individual will be covered against incidents and claims occurring within the period of insurance. However, even a claim does not arise until the concerned individual’s cover expires, if the said incident occurred during the time when the policy was active, the individual will still be covered.

Having said this, the cover cannot be backdated, nor can claims be retrospectively insured.

Whilst an error or omission occurring as a consequence of your inapt service may not be prevented by insurance, it is guaranteed to invaluably aid the succeeding situation you may find yourself in.

By:Sam Greenwell

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