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Start-Up Guide :: IT contractor insurance

Published on Feb 16, 2009 |

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Due to the specialist nature of many IT contractor roles, many contractors take out business insurance in case they are sued as a result of the work they have done, or due to an accident caused in the workplace.

As the tax landscape is increasingly complex in the self-employed world, many contractors also consider taking out tax investigation cover.

Professional Indemnity Insurance will protect you in the event of negligence on a project, loss of data, or unintentional trademark infringement, and more.

More and more clients expect their contractors to be covered by a PI policy. It is also an indicator that you are truly 'self employed' and may strengthen your position when showing that you are operating outside the IR35 tax rules.

You should also take out Public liability insurance, which will protect your limited company (if you have one) in the event that you cause the injury or death of someone on work premises.

Public liability insurance will also cover you if you accidentally damage property whilst on a client site.

Employers' liability insurance must be taken out if you have any employees. It protects employees if they are injured as a result of negligence by their employer.

If you run a limited company and own over half the share capital, you are not required by law to take out employers' liability cover.

If you are new to contracting, you will no doubt be aware of IR35. This together with other tax issues such as income shifting (the 'family business tax') has encouraged many IT contractors to also take out tax investigation insurance.

Tax investigation insurance will cover you in event of a status challenge by HMRC. Depending on the policy, you can also take out cover for the costs of representation, and even for any national insurance, tax, interest and penalties which may arise from an HMRC enquiry.

Alongside these key insurance products, you can also get cover for office contents, computer equipment, directors and officers' cover, and more. You can read more in our guide to professional IT contractor insurance.