Charlotte's Top Tips for Limited Company Insurance

There are several different types of insurance available to Limited Companies. Due to changes in recent years around how Limited Companies and their workers are viewed both by clients/agencies and by HMRC, it’s becoming more common for the agency and indeed the end client to require Limited Companies to hold insurance, even when they may not have done previously. This is because if a Limited Company contractor makes a mistake and is not appropriately insured, then any costs will be the responsibility of the end client or agency. In many instances now agencies/end clients will not work with Limited Companies who do not hold insurance. This alone makes it important to have the correct insurance cover, but of course insurance is particularly important in any instance where a company may require legal protection.

Most importantly, Limited Company contractors need to be aware that they are unlikely to be covered by either the end client or the agency’s insurance. This is because the Limited Company is a business in its own right - only permanent staff members will be covered by their employer’s insurance. A contractor with a Limited Company is an employee of that Limited Company rather than of the end client. Insurance is also a key IR35 indicator – if a company has its own insurance then this demonstrates that the company is a separate entity and that you are responsible for your own risk (please note that having insurance does not automatically mean that a Limited Company will fall outside of IR35 legislation).

There are three main types of insurance available to Limited Company workers:

Public Liability Insurance

• PL insurance policies protect a Limited Company from claims for damage to property or injuries caused by you or your employees whilst on company business. Insurance will cover legal costs, damages, and loss of earnings.
• A PL policy will protect your Limited Company from claims for damage to property or injuries caused by you or your employees to others whilst on company business.

Professional Indemnity Insurance

• PI insurance covers legal costs and expenses incurred, as well as any damages or costs that may be awarded if you are alleged to have provided inadequate services, advice, or designs, causing your client to lose money.

• EL insurance will cover the Limited Company in the event of an injury or even death of an employee while working on company business. It will cover legal costs, as well as damages and compensation.
• It is a legal requirement for all Limited Companies to hold EL insurance of at least £5m (Employers’ Liability (Compulsory Insurance) Act 1969), with the following exceptions:

                   - Limited Companies with a sole employee who owns at least half the share capital
                   - If you are self-employed and the sole employee, or employ just close family members

Contractors wishing to work through their own Limited Company should check their contract to find out which types of insurance are required by the client. Limited Company Contractors should consider taking out insurance even if it they are not contractually bound to do so, as it’s important to understand that by working in this way you are running your own company, and therefore are not an employee of your client.

Please feel free to call me on 01732 455300 if you would like to discuss anything from this blog in further detail.

Charlotte Coleman
Local Authority Team Leader