Friday, January 8, 2016

Understanding Contractor Insurance

Almost all companies, regardless of their size or trade, are lawfully required to carry adequate insurance policies. This is true for huge corporations or tiny enterprises, and is equally as effective for each. Covering potential eventualities is obviously what insurance itself is based on, and in the modern day business world or networking, competing and exchanging, the need for professional insurance is vast.
When discussing contractors, the aspect of insurance is often overlooked, and the importance of contractor's carrying cover is often underestimated. Many are practically unaware of what contractors actually are, some treating them as glorified employees or simply umbrella company operatives. To shed a bit of light on this however, contractors are fundamentally business owners, and because of this, contractors require small business insurance policies perhaps unknowingly by others.
Take Employer's Liability Insurance for example, a policy that is actually often required by law to be purchased by a company. Effectively, this policy covers a company against claims of injury or accident caused to any employees of that company due to a situation arising as a result of their employment. This basically means that if an employee gets hurt whilst at work because they were doing their job, the insurance would then cover the company. So, taking into consideration the fact that our nation's contractors are in fact business owners (and not simply overpaid employees) the need for a policy such as Employer's Liability Insurance suddenly becomes apparent.
Obviously contractors are not your usual business enterprise, they commonly do not have a hefty work force, they rarely work from a static office and they do not drive a van labelled 'Larry LTD'. This being said, contractors are still working through limited companies, therefore they are in fact a business, and it is this point that must be made known. Employer's Liability Insurance may seem like a pointless purchase for contractors by some, but often sole traders do in fact employ others through their companies. Take the previously mentioned and very much fictitious 'Larry LTD' as an example. This company would work as a limited company, and Larry would be hired on behalf of his company by businesses requiring his expertise. Obviously at this point, Employer's liability insurance would not be particularly necessary, but when you mention the fact that 'Larry LTD' employ's Larry's wife to oversee his finances, the situation changes (regarding mandatory insurances). Because the company now has an employee of sorts, the existence of employer's liability cover becomes essential, not only because it would cover any potential eventualities, but because companies are lawfully required to carry the policy if there are any other people working for the company.
Contractor insurance is a subject that unless working within the contracting field, is rather unknown. Although you may argue that this is as it should be, many professionals who are new to the contracting game are often stumped as to which insurances are necessary, and which they should be purchasing.

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