What insurance is compulsory in the UK?
If you work in the construction industry, you probably know that you need insurance. However, it can be challenging to understand what types of insurance you must have, and which are optional.
What insurance must I have?
There are two main types of insurance that are compulsory in the UK:
- employers’ liability insurance
- motor insurance
What is employers’ liability insurance?
It protects you and your business if a current or former employee suffers an injury or develops an illness as a result of working for you.
You are legally required to have employers’ liability insurance if you employ anyone. This includes:
- full- or part-time employees
- temporary staff
- apprentices
- volunteers
- people taking part in work experience or training schemes.
It may also include some sub-contractors you work with. If you are not sure, ask your insurance company.
What happens if I don’t have employers’ liability insurance?
You can be fined for every day that you do not have the right insurance. Being insured may also be a requirement in order to join a trade association, so not having insurance can indirectly have a negative effect on your business reputation.
Will the way my business is set up make a difference?
The rules relating to employers’ liability insurance are the same whether your business is set up as a limited company, a partnership, or if you are self-employed.
What about motor insurance?
If you drive a vehicle for work, you are required by law to at least have third-party insurance. This is to cover your liability for injury or damage to a third party or their property.
What are the penalties for not having motor insurance?
It’s illegal to drive on a road or in a public place without at least third-party insurance. Penalties include a fixed fine of £300 and 6 penalty points on your licence.
If the case goes to court, you could also receive an unlimited fine and be disqualified from driving. The police also have the power to seize and destroy the uninsured vehicle.
If an employee is driving your vehicle for work, you can still be penalised if you’re the registered keeper of the vehicle.
What other insurance do I need?
Although not compulsory, you should consider public liability insurance. This is designed to protect you and your business if something your business does injures a third party or damages their property.
You may find that larger clients and public sector organisations insist that you have public liability insurance as a part of your contract.
Depending on the nature of your business, you may also need professional indemnity insurance.
In addition to protecting you and your business from the consequences of a large claim, having the right insurance brings peace of mind and also helps establish you as a respectable and reputable business.
If you’re in any doubt about the insurance you need, speak to your insurance company.
If you work in the construction industry, you will need to consider which insurances you want even if you are self-employed or a sole trader. It’s important to get the right kind of insurance for your circumstances, which means understanding the available options.
Do I need builders’ insurance if I’m self-employed?
It doesn’t matter that you’re self-employed; you should consider builders’ insurance.
What is included in your builders’ insurance may vary between insurers. Make sure you understand if it includes public liability insurance and employers’ liability insurance if you employ anyone. However, there may be other types of insurance you need as well.
Why do I need public liability insurance if I’m self-employed?
Public liability insurance is designed to protect your business in the event something you do causes injury to a third party or damages property. It covers a range of situations that may arise between you, your work, and a member of the public or client.
It’s not a legal requirement to have public liability insurance, but you may find that many clients insist you have it as a term of their contract with you.
Why do I need employers’ liability insurance if I’m self-employed?
Employers’ liability insurance protects you should an employee or former employee be injured or suffer an illness as a result of working for you.
Legally, you must have employers’ liability if you employ anyone. It’s important to know that the definition of ‘employee’ includes more than just regular full-time workers. It also means:
- part-time workers
- trainees
- apprentices
- friends helping out for free
- other volunteers
- some sub-contractors (depending on the nature of the contractual relationship).
You can be fined £2,500 per day if you don’t have employers’ liability when you should. If you are in any doubt, speak to your chosen insurer.
What other construction insurance do I need if I am self-employed?
You should consider tools insurance. If your tools are lost or stolen, you need to be able to replace them quickly so you may get back to work.
You may also need to consider professional indemnity insurance. This protects you if you provide advice as part of your work, which subsequently turns out to be negligent, resulting in a financial loss for the client.
You should also consider whether you need contract works insurance. This covers you if works in progress are damaged.
How much insurance cover do I need?
Typically, you will need a minimum of £5 million in employers’ liability cover. A small business or self-employed contactor would normally have public liability cover of between £2 million and £10 million.
However, what is a recommendable level of cover for your business will depend on your circumstances and the types of jobs you work on. Talking to an insurer with experience of serving the construction industry is a good starting point for more information.
If you work in the construction industry as a contractor, it’s important to make sure you have the right insurance. This FAQ explains what you need to know about the insurance a UK-based contractor will need to operate correctly.
What are the legal insurance requirements for UK contractors?
You must have employers’ liability insurance if you employ anyone. This protects you and your business if an employee or former employee suffers an injury or illness as a result of working for you. You will need a minimum of £5 million in cover.
Employers’ liability covers a wide range of situations and workers. It’s important to understand that the term ‘employee’ includes trainees, friends helping for free, part-time workers, and even some sub-contractors you may work with.
If you don’t have employers’ liability insurance when you should, you can be fined up to £2,500 per day.
If you are in any doubt, check with your insurer.
What are the contractual insurance requirements for UK contractors?
Your contractual requirements will vary depending on the specifics of each contract. However, it is not uncommon for large businesses and public sector organisations to insist you have public liability insurance as part of your contract.
Public liability insurance is designed to protect you and your business should something you do (or fail to do) injure members of the public or clients, or end up causing damage to property.
You could lose out on contracts if you don’t have public liability insurance. Your professional body may also insist you have it to be a member.
What other forms of insurance do UK contractors need?
This may depend on the nature of your business. However, you should always consider insurance for your tools in case they are lost or stolen. Being insured allows you to replace them quickly and get back to work.
You may also need professional indemnity insurance. This protects you and your business if, as part of your work, you provide advice to a client which turns out to be wrong and ends up causing them a financial loss. The advice could be about plans, design, or specifications.
There may be other types of insurance you find helpful, such as contract works cover to protect ongoing projects that may be subjected to damage or vandalism. It is worth speaking to an insurance company so you can find the right type of cover for your business.