One horror story we regularly hear from contractors is that they did have insurance but were, in fact, underinsured.
While this wasn’t an issue for them for a long time — and kept their monthly or yearly premiums down — it became a problem when a claim was made against them because of a mistake they made, and they didn’t have enough insurance to cover it. This resulted in them having to foot most of the bill themselves with a variety of consequences including using up their savings, selling their home, having to give up their business or, in some extreme cases, declaring bankruptcy.
So you should always make sure you have the right level of insurance with appropriate limits, lest you find yourself in a situation that results in financial difficulties.
How do I know what my limits should be?
If you work through an agency, they will often stipulate insurance limits in your contract, and this can be the same for many clients. So, in this case, you will have guidance and should go with the amounts specified in your contract — or higher again if you prefer.
However, if you are not contractually obliged to have contractor insurance in place, you will need to use your judgement to work out the limits. Consider how much the project is worth in monetary terms to your client and how much it could cost them if delays occurred or mistakes were made. Factor in legal fees as well and ensure you’re covered for that amount or more. This could well be in the millions depending on your industry or sector.
What should I do if I don’t have the right limits?
A quick call to your insurance provider should sort this out. No insurer is going to want to stop you purchasing more insurance. However, if there are any problems (e.g. your provider is already insuring you at their top limit) you will need to consider switching your contractor insurance provider to one that will give you the cover you need.
At Kingsbridge, we offer generous limits on our insurance policies. For instance our Professional Indemnity cover is for £1 million any one claim, while our Employers’ Liability cover is set to £10 million any one claim, and our Public Liability cover is for £5 million any one claim, all as standard. This easily fulfils what is required by most agencies or clients, and should be enough cover for most contractors in most industries.
Our specialist team at Kingsbridge has experience working with contractors from a variety of sectors and industries, so we are well placed to advise you on what your limits should be and to ensure you get the correct cover for your circumstances.