Insurance

Professional indemnity insurance, also known as PI insurance or indemnity insurance, can help protect you if claims are brought against you by a client due to a problem with work you have done for them.

You may need professional indemnity insurance if you:

• provide advice to your clients
• handle data belonging to a client or business
• are responsible for a client’s intellectual property
• provide a professional service and could be challenged on your work. You may feel confident in the quality of your work, but any small business is vulnerable to a claim of negligence when professional advice or services fail to meet a client’s expectations and cause financial loss.

Despite your best intentions, accidents do happen and if the accident is as a result of something your business has done then a client, contractor, or member of the public can claim against your business for compensation.

Your public liability can be triggered by something as simple as spilling a drink over a client’s computer, or a contractor slipping on a wet surface in your office incurring injury or damage.

Why have public liability insurance?

• Even if you don’t have visitors to your office or home, you could still suffer a public liability claim against your business; for example, if you accidentally damage a client’s property in their office
• Easy access to ‘no win no fee’ legal services which help individuals claim compensation may increase the likelihood of a business experiencing a public liability claim
• Anyone working for you could trigger a public liability claim against your business if their actions at work injure a client or member of the public
• Many companies and organisations will also insist on their suppliers having public liability insurance cover in place.

As a small business you do your best to limit the possibility of injury or illness to your employees resulting from their work, but if they do have an accident or become ill, your business could be sued for ompensation under your employers’ liability insurance. As a result, businesses in the UK that employ staff are legally obliged to have employers’ liability insurance to provide cover against a claim from an employee.

Why have employers’ liability insurance?

• In most cases if you have employees, employers’ liability insurance with cover of at least £5 million, is a legal requirement and you could be fined if you’re not covered
• Easy access to ‘no win no fee’ legal services which help employees claim compensation may increase the likelihood of a business experiencing an employers’ liability claim if they suffer an accident or illness which they think has been caused as a direct result of their work
• Your employers’ liability could be triggered even if the employee is a voluntary helper or is self-employed but working under your supervision
• The legal and compensation costs of defending your business against an employers’ liability claim could significantly damage your business.

Although we don’t like to think about it, life insurance offers peace of mind that your dependants are protected and once it is organised you will not need to think about it again. If the worst were to happen, a tax free lump sum will be paid out to your dependants to pay off the mortgage or any other outstanding debts, or to just take the pressure off financially at what will already be a very difficult time for your family.

If you currently pay for your life cover from your own bank account you will be paying out of post-tax income, and if you pay for it from your business account you will probably be taxed on the payment as if it were income.

There have been changes in the law that allow you to have your company pay the premiums instead via a relevant life policy.

Relevant life policy tax benefits are available to both the employers and employees:

• You will save Tax by having the company pay the premium
• The premium will not be included as a P11D benefit
• Premiums are not subject to National Insurance payments for employer or employee
• Your company can claim Corporation Tax Relief on the premiums
• Benefits are payable tax free
• Benefits do not count towards your lifetime allowance for pension purposes

A Relevant Life Plan could result in savings for a business when compared with a typical life policy. Click here to find out more.

Why do you need protection?

Contractors can be subjected to various work related pressure that can take a serious toll on your health. Lack of mobility during the working day, rushed break times and the stress associated with responsibilities and invariably tight deadlines can all have an impact on a previously healthy individual.

Such lifestyle related illness can have a great impact on freelancers' financial health too and critical illness cover is designed to pay out a lump sum on diagnosis of, rather than necessarily death from, a range of serious conditions. This cover can be of far more relevance to many contractors' life insurance which pays out only on your death.

What is the solution?

You can protect yourself from the potentially disastrous financial consequences of such conditions, so that a lump sum is paid on diagnosis of the illness.

For a relatively small regular monthly premium a contractor can arrange for a lump sum to be provided simply on diagnosis of the illness - funds that will to help pay for a period of convalescence, pay for changes to home or car to accommodate a reduced state of mobility, and go towards maintaining your independence. Without, perhaps, the burden of your mortgage and with money in the bank you can then decide whether you need to get back into the rat race.

What to look for in a critical illness policy?

• Medical definitions of what is covered are very important - these must be comprehensive enough to be of practical use to you in the event of a claim.
• The provider must have a good track record of actually meeting claims- with life cover alone you're either dead or you're alive, and so there's no question of whether an insurer can avoid paying benefits out, but with a critical illness the definitions of illnesses that will trigger a payout must be carefully considered.
• Premiums must also remain affordable throughout the term of the policy so that protection can also be maintained as you get older and are even more likely to fall ill.

As a contractor, you should be enjoying all of the benefits that come from leaving permanent employment. These include greater flexibility and probably a higher income, however, with this freedom comes a higher risk that your income could be disrupted by a routine operation or unforeseen illness. Every day that you are not on your client’s site is a day’s income lost forever.

Staying healthy is important, especially if you're running your own small business. Our private health insurance solution is great value for money and it’s really easy to set up. If you have your own personal cover for you and the family you can also look to run the cost through the business and save you the cost personally.

Private Medical Insurance offers you the peace of mind that should you fall ill you can:

• Avoid the NHS waiting list.
• Get the best treatment when you need it.
• Reduce your time away from work.
• Benefit from immediate cover for you and your family.

So how does Income Protection work?

You take out a policy with a PHI provider, who in return will pay a portion of your lost income, should you be unable to work due to ill-health or an accident.

The cost of the policy will depend on the waiting period (or deferred period) that you choose before the policy pays out.  Generally, this can be between 4 weeks and 1 year.  The longer your chosen deferred period, the less your Permanent Health Insurance will cost.

A deferred period of a month will cost you more but will cover you if you needed to stop work in the short term, for example if you had a short illness or a sporting injury.

Dependent upon any savings you may have, you could choose to defer your insurance for a longer period such as 3 to 6 months.  This means that you couldn’t claim for any short term problems but would be covered against a more serious injury or long term illness.

Who pays the premium – me or my company?

It is possible to pay for the cover personally from your net income in which case benefits in payment are tax free. Alternatively, you can fund income protection insurance from the company account in which case benefits enter the company tax free, but you are then charged tax and national insurance on any salary that you draw out as income. Whilst the premium is a business expense in the same way as sellotape or pension payments are, and you will pay no benefit in kind for this policy, the real reason for funding your policy this way will be to ensure that executive pension premiums can be maintained even in ill health.