A self-employed professional has a number of options available to them for protecting themselves against the biggest risks to their business.
You need liability insurance to protect you against compensation claims; property insurance to protect your business property; personal accident and sickness insurance to protect your income if you’re unable to work; and legal expenses insurance to protect you if you become involved in legal action.
There are several liability insurance protections to think about, all important when someone makes a compensation claim against you. It’s important because some compensation awards can exceed £250,000. As well as paying any compensation awarded, liability insurance – typically – also covers:
- The legal fees
- Any wages that the claimant lost as a result of the incident
- Any other associated costs and expenses
Your liability insurer will also handle the claim on your behalf which means that you don’t have to worry about dealing with solicitors and potentially complicated legal arguments.
There are a number of different types of liability insurance:
- Employer’s liability insurance
- Public liability insurance
- Professional indemnity insurance
Employer’s liability insurance
Employer’s liability insurance covers compensation claims made against you by your employees. You are legally required to have this insurance if you employ anyone. You are also required to display a Certificate of Employer’s Liability and to keep your insurance documentation for 40 years.
Public liability insurance
Public liability insurance covers compensation claims made by other people. The standard cover only covers compensation claims involving injuries or property damage, so you should ensure that your public liability insurance policy contains a financial loss cover extension to ensure that you are covered for compensation claims for purely economic losses.
Public liability insurance isn’t required by law but because compensation claims can be difficult and expensive to settle, it would be unwise to consider operating without it. You may also be required to have this type of insurance as a condition of a contract with a client, or as a condition of your membership of a professional body.
Professional indemnity insurance
Professional indemnity insurance is similar to public liability insurance but rather than covering claims arising from something you have done or failed to do, it covers claims arising as a result of professional negligence. Again, this is not required by law but you may be contractually required to have it or it may be a condition of your membership of a professional body.
This type of insurance covers your business property against accidental damage or losses due to theft. If you work on client sites you should check that your property insurance doesn’t contain any restrictions in terms of the cover that applies to property that is taken away from your business premises.
You should also make sure that insure for the full value of your property. You could be penalised if you are under-insured when you have to make a property insurance claim.
Personal accident & sickness insurance
Sickness insurance covers your income if you are unable to work because you’re ill or have been injured. That means that you can concentrate on getting back on your feet and don’t have to worry about how you’re going to cover your monthly outgoings during your recovery.
A weekly benefit is payable while you are off work. If you won’t be able to return to work a lump sum is payable instead. The lump sum is also payable in the event of death or in the event of certain specified injuries.
Legal expenses insurance
Legal expenses insurance covers you if you become involved in legal action. It covers your legal fees, but importantly, your legal expenses insurer will also help you deal with the legal action. A range of different types of legal action are covered, including:
- Contractual disputes
- Disputes with neighbours/clients
- Employment tribunals
- Tax/VAT inspections