As a tradesman or contractor, your main focus is in dealing with your customers, doing a good job for them and collecting payment. Insurance may be something that is not really foremost in your thoughts. However, it is very important to protect your business and your reputation. Insurance for tradespeople and contractors covers a very wide range so what follows is just a precis.
Before going into the details of cover, one thing that is very important is to make sure that your policy covers the work that you actually do. Some time ago, a sub-contractor carried out plumbing work as part of a kitchen fit-out but his insurance only covered him for carpentry so the claim for the subsequent flood was thrown out. He had to do a disappearing act to avoid the wrath of both the home owner and of the main contractor.
In the current climate, people are inclined to blame others for everything and also to start legal proceedings. Even if you are not at fault, the time, effort and money required to deal with a frivolous claim can be significant. We say that insurance in not an expense but an investment in your peace of mind. Also, it is a legitimate business expense on which you can claim tax relief.
Liability insurance falls into a number of categories:
- Public Liability: covers damage to third party property or injury to people. The normal limit of indemnity (maximum payment) used to be £1,000,000 but we now consider £2,000,000 to be a sensible minimum. Some customers may require higher limits with £5,000,000 not uncommon.
- Products Liability: covers damage or injury caused by a product that you supplied. Often such claims can be passed on to a retailer, wholesaler or manufacturer but initially they come to you. The indemnity limit typically follows that of the public liability.
- Employers’ Liability: this is absolutely essential as not having correct cover in place is a criminal offence with fines of £2,500 per day – yes, per day. You can also be fined £1,000 simply for not displaying proof of insurance correctly. The rule about who has to have Employers’ Liability cover is pretty simple – if you can hire or fire someone or tell them what to do, they are an employee. This includes volunteers, family members, work experience placements, apprentices and so on. There are a very limited number of exemptions that we can advise you about.
- Efficacy: this is not automatically provided but can be vital for some trades such as security or fire alarm installers/maintainers; air conditioning or refrigeration contractors and the like. It covers something not working such as a fire alarm or sprinkler system not operating when it should. The property damage or even loss of life can be very significant.
It is important to understand the difference between Bona-Fide Sub-contractors (BFSC) and Labour Only Sub-contractors (LOSC). The latter are always considered as employees as they will be under your direct control. BFSCs will generally organise their own work, provide their own tools and will deal with their own tax affairs. It is essential when employing a BFSC that they hold public liability insurance at least equal to your own.
There are other areas of cover that can be provided either as an add-on to a liability policy or on a stand-alone basis.
- Contract Works insurance, also known as Contractors All Risks insurance, covers temporary and permanent construction works plus materials should they be damaged, or the materials stolen, prior to completion. Contractors Works can be used to cover new builds and refurbishments, repairs or extensions.
- Own plant: diggers, hoists and the like are a significant business cost and need to be insured for loss, damage or theft.
- Hired-in plant: hiring companies can often provide insurance but this is generally quite expensive in relation to having your own cover.
- Professional indemnity (also known as professional negligence): this applies to businesses that provide advice and/or designs. Air conditioning contractors, security and fire alarm companies are typical of those who need this cover.
- Legal expenses: businesses become involved in a wide range of legal matters such as contracts, debt collection, prosecution by HSE, HMRC and any number of other Government agencies. Having access to a solicitor at an early stage can be very useful. All policies include telephone advice lines providing free advice for legal and tax matters. Using these can save a significant amount of money.
Tradespeople will generally have cars, vans or trucks requiring insurance. Again, vehicles are a significant business expense that require good insurance cover.
With our 30+ years of experience in arranging insurance for tradespeople and our access to 130+ insurance companies, Lloyds’ and managing agents, we can offer advice and the correct cover for any trade. Quotations and advice are offered free of charge and obligation. See our website