Professional indemnity (PI)
The most important policy for most contractors. Covers you against claims that your professional advice or work caused financial loss to a client. Many client contracts mandate £1M-£5M minimum cover.
- Typical cost: £100-£300/year for £1M cover; £200-£500/year for £5M.
- Higher rates for high-risk sectors: financial services, healthcare advisory, engineering with safety implications.
- Often required as a contractual condition before you can start work.
Public liability
Covers third-party injury or property damage caused by you or your work. Less critical for purely office-based contractors, essential for site-based or visiting consultants.
- Typical cost: £60-£150/year for £1M-£2M cover.
- Often bundled with PI at a discount.
IR35 (tax investigation) cover
Covers the cost of defending an HMRC IR35 investigation - typically £20-£50K of accountant and legal fees over 6-18 months. Some policies also cover the tax settlement if you lose.
- Typical cost: £100-£300/year.
- Often essential for outside-IR35 limited company contractors at scale.
- Look for cover that includes both defence costs AND settlement.
Other useful policies
- Contractor all-risk - covers tools, equipment, laptops, off-site or in transit. £80-£200/year.
- Business equipment cover - if you have substantial kit beyond a laptop.
- Income protection - covers a percentage of your day rate if you can't work due to illness/injury. £30-£80/month for solid cover.
- Critical illness cover - lump sum on diagnosis of specified serious illnesses.
Frequently asked questions
Is contractor insurance tax-deductible?+
Yes - business insurance (PI, PL, IR35 cover, contractor all-risk) is allowable as a company expense if you trade through a limited company, or against your self-employment profit if you're a sole trader.
What's the difference between contractor all-risk and contractors all-risks insurance?+
In UK contracting, contractor all-risk typically covers your equipment and tools. Contractors all-risks (CAR) is a different product for construction projects covering the works themselves. Don't conflate the two when shopping.
Do I need both PI and public liability?+
Most contractors should have both. PI covers errors in your work; public liability covers physical injury or property damage. Some clients require both as contractual minimums.
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