Do carpenters need public liability insurance?

As a carpenter and tradesperson, it’s important to have the correct insurance. But with so many different types of insurance out there, it can be difficult to work out which cover you need and why.

What is public liability insurance?

Public liability insurance is one of the main and most important types of insurance you might need to consider if you or your work comes into contact with members of the public or clients.

In the event something you do causes damage to property or causes someone injury or illness, it is your public liability insurance that will cover the costs of any damages, compensation, and legal fees.

Am I legally required to have public liability insurance?

Although the law does not state that you need public liability insurance, many clients – especially public sector organisations and larger businesses – may insist you have it as a term of your contract, and will not work with you if you don’t have it.

Trade associations and professional bodies may also insist you have public liability insurance as a term of their membership. As a result, it can affect your business and reputation as a respectable tradesperson if you don’t have it.

Does it matter whether I am self-employed or a limited company?

Regardless of how your business is structured you may still need to consider public liability insurance.

The only difference is that you may find your insurance costs less if you are self-employed. It will also cost less the fewer employees you have.

What are the chances of needing public liability insurance?

Apart from the situations described above, you may be surprised how often tradespeople need to make a claim. Accidents happen, and even a small incident can quickly result in a court order for substantial damages and compensation.

In addition to the injured party’s lost earnings and medical expenses, there will also be legal costs to consider, which can quickly add up. You will also need to spend time dealing with any legal proceedings, which is also time when you should be working.

If you or your business cannot pay the amount ordered by the court, your business and assets could be at risk.

If you are a carpenter, you will need to consider which insurances to take out – whether you work on a self-employed basis or run your own limited company or partnership.

What does carpenters’ insurance include?

Carpenters’ insurance can mean different things to different people and insurance providers. However, it could include:

• employers’ liability insurance
• public liability insurance
• professional indemnity insurance
• insurance for tools

When do I need employers’ liability insurance?

You will need this if you employ anyone, as it is a legal requirement. You can be fined £2,500 a day if you don’t have it. You will also need it if you have any trainees or apprentices, volunteers, part-time workers, or even for some sub-contractors.

You should always check with your insurance company if you are in any doubt about whether you need employers’ liability insurance.

Do I need public liability insurance?

Although it is not a legal requirement, many larger clients and public sector organisations may require you to have it as a term of their contract.

It protects your business if something you do causes harm or injury to someone or damages their property.

If you are found responsible for causing damage or injury, and you don’t have insurance, you could find yourself paying thousands or hundreds of thousands of pounds in damages and legal fees. If you cannot pay, your business and assets may be at risk.

You may also find that some professional trade associations will not allow you to join unless you have public liability insurance.

Do I need professional indemnity insurance?

You will need to consider this if you provide professional advice as part of your work. For example, you may give formal guidance on design or specifications.

If that advice turns out to be negligent and causes financial loss or damage for a client, your professional indemnity insurance will cover you if they choose to sue.

Is insurance of my tools part of my carpenters’ insurance?

If your tools are stolen or damaged, it’s important that you can replace them as quickly as possible so that you can carry on working. As a result, tools insurance could be a part of your carpenters’ insurance considerations.

I am self-employed. How does this affect the insurance I need?

Your insurance premium may be slightly less if you are self-employed than if you operate as a limited company with employees for example.

If you work as a carpenter, either on a self-employed basis or within a small, limited company or partnership, you may need to think about insurance.

What insurance do I need?

There are various types of insurance you may need to consider, including:

• public liability insurance
• employers’ liability insurance
• professional indemnity insurance
• insurance for your tools

What is public liability insurance, and do I need it?

This kind of insurance is an important consideration if you come into contact with the public, their property or that of your clients.

Public liability insurance is designed to protect you and your business in the event something you do causes a client or member of the public harm or illness, or damages their property. For example, someone who trips over tools left on site, or damage to a car parked near a site.

Incidents like these can be minor, but damages often amount to thousands of pounds.

What is employers’ liability, and do I need it?

You are legally required to have employers’ liability if you employ anyone. This includes trainees and apprentices.

Employers’ liability protects you should a current or former employee suffer injury or illness as a result of working for you.

You can be fined for every day you don’t have employers’ liability insurance when it should be in place.

What is professional indemnity insurance, and do I need it?

Professional indemnity relates to any professional advice you give. You could need it if you give advice about specifications or aspects of design, for example dimensions of beams or methods of installation.

This insurance will cover you if the advice you provide turns out to be wrong or negligent, resulting in a financial loss for the client.

Do I really need to insure my tools?

If your tools are stolen, you won’t be able to work until you have bought replacements, which can be costly.

With insurance cover you will be able to replace your tools quickly, allowing you to get back to work.

Does it matter whether I am a sole trader, limited company, or partnership?

Regardless of how your business is structured you may need to consider which insurance covers you need. However, the cost of your premium will be affected by how your business is set up and how many employees you have.

If you’re a small one-person outfit, your insurance will be less than for a company with six employees.

Other factors that may affect the cost of your insurance include the types of projects you work on and where you work. If you take on large projects in a city, your insurance may cost more than if you mostly work on small domestic projects in the countryside.

Do I need carpenter’s insurance?

There are certain circumstances in which you are required by law to have insurance, and others where it is only important to consider if you need it.

When am I legally required to have insurance?

You must have employers’ liability insurance if you employ anyone. This applies whether you have full-time staff, apprentices, or trainees, or even some sub-contractors.

Check with your insurance company about your eligibility. You can be fined £2,500 per day if you are not correctly insured when you should be.

Does it make a difference if I am self-employed?

It doesn’t matter if you’re self-employed, run a limited company, or are part of a partnership; the requirements for insurance are the same. However, the cost of your insurance premium may be less if you are self-employed.

Do I need insurance if I only take on small projects?

It doesn’t matter what size projects you work on; accidents can still happen. If you only work on small, domestic projects, it may mean your insurance premium is less than that of a carpenter who works on large, complex jobs.

What other insurance do I need?

You might want to consider public liability insurance. This is designed to protect your business if you cause damage to someone’s property or do something that causes them injury or harm.

Claims for damages after an accident or mistake can amount to many thousands of pounds and include legal fees. You need insurance to cover those costs. If you can’t pay, your business and assets may be at risk.

Some larger clients may insist you have public liability insurance as part of your contract. They will not work with you if you don’t have it.

You may also find your professional body or trade association also insists you have this insurance as part of your membership. Having insurance helps reassure clients that you are a reliable professional. Not having it can result in damage to your reputation.

You may also need professional indemnity insurance. This protects you if you give professional advice which turns out to be negligent and causes financial loss or harm.

Do I need separate insurance for my tools?

You should always consider if you need to insure your tools. If they are lost or stolen, you will be able to replace them quickly and return to work.

Working as a carpenter can be a great career, especially if you’re thinking of starting your own business. However, it’s important you understand what the business risks are, and make sure you are properly protected against them.

What are the main risks?

If this is your own business, you will be responsible for finding work. If you haven’t got work, then you won’t get paid.

There is also a risk of getting into debt, which could occur in a variety of ways: e.g. the cost of materials suddenly rising, at a time when clients are struggling to pay your invoices. Unfortunately, you must still pay your liabilities.

Finally, if something your business does causes damage to someone’s property or injury to someone, there is a chance you could be sued for damages and compensation.

Does it matter how I set up my carpentry business?

You can set up your carpentry business either on a self-employed basis or as a limited company.

Setting up as a self-employed carpenter is relatively easy to do; you just need to make sure you register with HMRC for self-assessment.

However, when you’re self-employed, there’s no difference between your personal finances and your business finances. If the business falls into debt, or someone makes a claim against your business, you may have to pay out of your personal assets (if your business hasn’t got enough to pay). That means assets like your home could be at risk.

What can I do to mitigate the financial risk of being self-employed?

The most obvious and cost-effective thing you can do is to make sure you have proper insurance in place. There are various types of insurance that are designed to protect your business. These include:

• public liability insurance
• employers’ liability insurance
• professional indemnity insurance
• insurance for your tools

The amount of insurance you need and how much it costs will depend on the circumstances of your business, e.g. its size, the type of work you do, etc.

What if I set up my carpentry business as a limited company?

It’s a little more complicated to set up as a limited company. There are more legalities to comply with and it costs a little more to do.

As a limited company, your business assets and personal assets are separate. If the company gets into debt or you are sued, your personal assets are not at risk.

What about my business assets?

Although your personal assets may be protected if you set up a limited company, your business assets can still be at risk if the company gets into debt or is sued.

Therefore, you should always have insurance to protect your business assets.