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What our Nerds say about contractor insurance

Whether you injure a client, incur an injury yourself, or have a disagreement that leads to an accusation of negligence, contractors of all types face professional and personal risks that can be costly.

The best way to protect yourself from the risk of hefty compensation and legal costs is to take out a comprehensive contractor insurance package.

There are some types of insurance that it may be sensible for every contractor to have, such as professional indemnity insurance and public liability insurance. But you can also tailor your policy to suit your particular type of contracting profession and the risks posed by your specific business activities.

What is contractor insurance?

Contractor insurance is not one insurance package, but rather an umbrella term for a variety of types of insurance that can protect contractors.

This may be for a plumber or an IT contractor who requires protection from the financial costs of dealing with legal proceedings, making compensation payments, replacing lost, stolen or damaged goods, or being unable to work, for example.

As every contractor is different and faces different risks, many insurance providers will allow you to tailor your package to match your specific needs. Given the broad scope of industries that contractor insurance may apply to, it is important to consider the specific risks of your business to make sure you choose a policy to suit the way you work.

Contractors all-risk insurance

As its name suggests, contractors all-risk insurance is designed to cover many of the risks you are likely to face during a construction project.

As standard, it can include contract works – which protects against events that interrupt the progress of your work – hired-in plant cover, own plant cover, and tools insurance. It can also be tailored to particularly hazardous or risky work.

Exactly what is included may vary between providers, so make sure that you confirm the details of your insurance.

Professional indemnity insurance for contractors

Many contractors are in the business of offering expert advice and services to clients. This could be in the form of IT security analysis, accounting services, or construction site management.

Whatever work you do, if you make a mistake or give incorrect advice that leads a client to suffer professional or financial loss, you could face claims against your business for negligence. Professional indemnity insurance for contractors can cover legal and compensation costs resulting from an accusation of negligence, as well as replacement costs, for example, if work needs to be done again.

» COMPARE: Professional indemnity insurance

Contractors public liability insurance

Public liability insurance covers all manner of incidents that might affect members of the public either on your premises or as a result of your business activities. This can include personal injury, or even death, as well as loss or damage to someone’s property caused by you or one of your employees if you are not a sole trader.

For example, if you’re a roofing contractor repairing a leaking roof, and a dislodged tile falls. Whether that tile lands on a client’s head or their car, contractors public liability insurance should have you covered.

» COMPARE: Public liability insurance

Contractors employer’s liability insurance

If you employ any staff, whether part or full time, you are legally obliged to have employers’ liability insurance, which should cover you for at least £5 million. Without it, you could face a £2,500 fine for every day they are not insured. The only exception is if your staff are members of your immediate family or based abroad.

Other types of insurance for contractors

If you’re a trade or construction contractor, then you may have expensive tools and equipment to protect. If you don’t plan on covering these under all- risk contractor insurance, then you can take out separate tools, equipment, hired- in plant or own plant cover, according to your business needs.

Finally, contract works insurance can be a great addition to your policy if there is a risk of a disaster, such as a fire or flood destroying, disrupting or delaying your work. This may already be included in your insurance if you have taken contractors all- risk insurance.

Likewise, personal accident insurance can be a big help if an injury prevents you from working for any length of time or, the worst happens, and you are fatally injured either at work or elsewhere.

You may also consider business buildings insurance, business contents insurance, and cyber and data insurance if these are relevant to your work.

» MORE: Everything you need to know about business liability insurance

Do I need contractor insurance?

Other than employers’ liability insurance, you often don’t need to have contractor insurance by law. However, client’s may not agree to work with you unless you have proof of insurance. Likewise, some industries, such as medicine, may require certain types of insurance by law.

So, even if you’re willing to risk the possibility of an accident or disaster without the protection of insurance, you might not be able to find any work.

» MORE: Do you need business insurance?

What does contractor insurance cover?

Contractor insurance could include all, or some of, the following:

  • contractors all risk insurance
  • professional indemnity insurance
  • public liability insurance
  • employers’ liability insurance
  • tools and equipment insurance
  • hired in plant or own plant insurance
  • contract works insurance
  • personal accident insurance
  • business buildings insurance
  • business contents insurance
  • cyber and data insurance

Often, insurance providers will allow you to choose from a selection of policies. You may include all of the above or pick just the relevant options to suit your business.

What isn’t usually included in contractor insurance?

What is or isn’t included in contractor insurance is up to you and how you run your business, so you can use our comparison tool to shop around for the right package to meet your specific requirements

Providers are often flexible about what can be added to your policy, so make sure to talk to them about your requirements and the specific risks you face. They should be able to help create a policy that is tailored to your needs.

Business insurance packages don’t generally include vehicle cover. If you use a vehicle for work, you will need some sort of business use cover rather than relying on personal car insurance. If you use a van to transport materials and equipment to your work, you should consider a standalone business van insurance policy.

How much does contractor insurance cost?

The main factors that affect the cost of your contractor insurance policy are the type of covers included, the length of time you’ve been in business, the number of employees you have, and the specific risk profile of your profession.

For example, if you have 10 employees, you’ll need a higher coverage limit for your employers’ liability insurance than someone with two employees. Likewise, if your contracting work frequently brings you into contact with the public, you may need a higher public liability coverage limit than someone who works alone at home all day.

How to choose the best contractors insurance policy for you

Do you know your requirements? Which types of cover do you need? And how much do you need?

If so, you’re ready to find a suitable contractors insurance policy. NerdWallet can help. Simply click 'get a quote' at the top of this page.

Contractor Insurance FAQs

What insurance do I need as a contractor?

Most contractors will likely consider professional indemnity insurance, public liability insurance, and employers’ liability insurance.

If you work in construction, contractors all-risk insurance could be a good idea. It often includes contract works cover, hired-in plant cover, own plant cover, and tools insurance.

» MORE: Professional indemnity insurance explained

Do self-employed contractors need insurance?

Self-employed contractors are not legally obliged to have insurance unless they employ someone, in which case they need employer’s liability insurance.

But, it’s a good idea to protect yourself from the financial consequences of a claim against your business, with a contractor insurance policy. Likewise, some industries may require a minimum level of insurance while some professional bodies may also require minimum insurance for you to become a member.

Do contractors need liability insurance?

Public liability insurance is worth considering for all contractors, especially those whose work poses a risk to the public or their property.

Do I need public liability insurance for a subcontractor?

It depends on what type of contractor you’re hiring. If you are using an independent contractor – a sole trader plumber, for instance – and they decide on their own working hours, invoice you for their work, and supply their own materials and equipment, then they should have their own public liability insurance, which you should ask to see before hiring them.

However, if you are employing labour-only subcontractors who work for you much in the same way as employees, then you will need to provide public liability cover for them.

Do I need employers’ liability insurance for subcontractors?

It depends on the type of subcontractor you hire. You are legally required to provide employers’ liability cover for labour-only subcontractors. These are subcontractors who work like employees, using your tools and materials, and at set hours to suit the project you’re working on.

About the author

Henry Williams
Henry is passionate about helping individuals and businesses stay informed. Over the last 8 years, he’s written for startup and small business sites, with a focus on finance, insurance, and websites. Read more
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