Tradesman Insurance

Do I Need Tradesman Insurance?

So, what might be in a tradesman insurance package, what does it mean and is it strictly necessary. Our guide:

Subcontractor Issues

Over the insurance status of contractors, the main thing to remember is that you're liable for work carried out by your own business but also for the work of any sub-contractors you use (eg, plumbers, electricians, plasterers, welders, painters).

There are two types of subcontractor - Labour Only and Bona fide subcontractors. Bone fide sub-contractors should have their own public liability cover. If they don't or it's not enough, then any claim for property damage or injury against them can land at your door as the contractor who hired them.

You can add on contingency cover to protect you against this type of claim up to a specified limit.

Labour only subcontractors

You need employers liability insurance for any labour only sub-contractors you take on to complete a job, even if they're self employed and have their own insurance cover.

You're using them as "labour only" ie you tell them what to do and they use your materials and tools, which means you're classed as their employer and so you're legally responsible for their work and welfare. You're also responsible for any labourers they hire.

All labour-only subcontractors must be covered under your employers liability (EL) policy. You must include their details in the manual workers sections of the insurance quotation.

Bona-fide subcontractors

You should find don't need employers liability insurance for bona-fide subcontractors, also known as "Supply and Fix."

You hire them to carry out work on a contract that you can't do yourself. They work under their own steam, supply all their own materials and tools and should have their own public and employers liability insurance cover.

You could be a building contractor, for example, who needs to call on the services of an electrical contractor to do all the electrical work in a property. Your insurance policy won't necessarily cover their liability for any damage or injury they cause on a contract, but it should cover your liability arising out of their actions.

You must check that a bona-fide subcontractor has adequate public liability insurance before you hire them, usually to the same level of indemnity as you have, otherwise you could pick up the tab if anything goes wrong. Not checking their insurance cover could void your own policy.

Always look at their policy schedule for exclusions, eg application of heat which could mean their insurance is void if they cause an accident or damage while welding, say. If they don't have insurance then you may end up picking up the entire bill for their mistakes on a contract.

Temporary Employee Cover

Check the small print if you need to hire extra employees to complete a contract. Cover is usually for a limited period - up to 50 free man days, for example. Or be restricted to the number of extra employees - three, say. Is it flexible enough or will you be left without cover? up ⇑

Do I need Public Liability Insurance?

Bizarrely, public liability insurance isn't a legal requirement. You may be living dangerously if you don't have it because it covers your business's legal liabilities for loss, injury or death to members of the public and damage to their property.

It's a sad fact of life that a simple mistake could end up costing you your livelihood. Different trades have greater risks: an electrician has a greater fire risk; a plumber flood.

If a member of the public injures themselves because of your negligence (eg loses an eye after bumping into unpadded scaffolding), or you damage property while carrying out your trade, you could be liable for millions.

Public Liability Insurance covers these types of claims and usually any legal expenses involved.

Responsible contractors won't let sub contractors on site without public liability insurance. Similarly most local authorities won't hire contractors who don't have public liability cover.

If you're a builder, The Federation of Master Builders won't accept you as a member without public liability insurance.

Insurers offer different levels of public liability cover - typically £1m, £2m, £5m or £10 million. The difference in cost at lower levels is often slight. so see what you can afford.

When looking for public liability quote, remember you might want to include all labour only subcontractors, regardless of whether they have their own public liability insurance. up ⇑

Do I Need Employers Liability Insurance?

If you're a one-man firm, ie a sole trader, you might not need Employers Liability insurance. But if you hire someone even just for a couple of hours' casual labour, you do. If you're a limited company with one employee (you) who owns 50% or more of the share capital, you don't need employer's liability insurance. For all trades, employers liability cover is compulsory if you employ people outside your close family.

Under The Employers' Liability (Compulsory Insurance) (Amendment) Regulations 2004 you can be fined up £2,500 a day for not having it. The minimum cover for employers' liability insurance is £5m, but most insurers provide cover up to £10m.

Employers' liability cover protects your business's legal liabilities to meet claims from staff who fall ill, are injured or die as a result of their work. Employees include anyone who works for you, including contract workers and apprentices.

Labour-only subcontractors are considered to be staff. If you hire bona fide subcontractors make sure that the legal relationship between you and them is crystal clear, ie it's a contract for service as opposed to a contract of service. You'll not want an injured contractor to claim against you as if they were your employee. By law you must display your employers liability insurance certificate at any place of work. up ⇑

Do I need Motor Vehicle Insurance?

Tradesmen using motor vehicles for their trade must have at the very least Third Party fire and theft cover, with vehicles such as cars and vans covered for business use.

You can often use your own private car or van for your trade, but it must be insured for commercial use. If it isn't then you may find you won't be covered if you're in an accident or your vehicle's stolen or broken into and laptop or tools stolen. up ⇑

Do I Need Buildings Insurance?

Buildings insurance covers the structure of a building against damage from risks such as flood, fire, subsidence and accidental damage. Your insurance company will pay to repair or rebuild a property.

If you own your own premises, you will need to consider buildings insurance to cover the cost of the full rebuilding of your business premises - not the current market value. You should also consider cover for the cost of professional fees (eg architect, surveyor) and the cost of demolition and site clearance. The insurance premium is based on the value of the property.

Standard cover usually protects against fire, lightning and explosion of domestic gas and boilers but a more comprehensive option is usually "all risks" to include accidental damage or loss not specifically excluded in a standard policy.

So - depending on your attitude to risk and your location - you may want to cover your business property for explosion, riot, malicious damage, storm, and flood, collision by aircraft, road and rail vehicles, escape of water from tanks or pipes and sprinkler leakage.

If you rent the premises, the owners are generally responsible. Check their buildings insurance policy to ensure it's enough.

The cost of the insurance depends on several factors - the type of building, your trade, distance from emergency services (eg fire brigade), your attitude to risk management and any previous claims' history. up ⇑

Do I Need Contents Insurance?

Contents Insurance covers moveable items such as stock, machinery, plant etc against damage from risks such as fire, flood, subsidence and accidental damage. What if your contents of your premises were flooded or caught fire? Your business could be in serious trouble. Make sure that valuable contents such as trade materials, office furniture, fixtures and fittings and equipment are fully covered to avoid that headache.

You can combine Buildings and Contents insurance to meet the cost of repairing damage to a building or replacing stolen or damaged equipment and stock.

You can insure plant or trade materials on a new for old basis, or depreciation (ie wear and tear is taken into account when settling claims). Check whether there is cover for trade materials in transit. You may need to insure this separately. It's not uncommon for goods in transit to fall off a lorry and be damaged beyond repair. up ⇑

Do Tradesmen need Tools Insurance?

Theft of or damage to valuable trade tools can be a disaster. Without your tools you can't work and you could find yourself having to meet the cost of penalty payments for missing contract deadlines.

For most tradesmen, it's essential that the insurance policy covers the cost of replacing expensive tools if they're lost, stolen or damaged.

Some insurers cover tools as standard, others offer it for an extra premium. Limits per employee can vary widely - from £500 to £5,000. When weighing up quotes, make sure you're comparing like with like. up ⇑

Do I Need Goods in Transit Insurance?

If you shift large amounts of trade materials around, goods in transit insurance gives you protection from theft or accidental damage. If you have to uplift or deliver expensive loads, it's worth considering. If you import from abroad or export overseas, investigate cargo insurance to protect loads in transit.

If you want to cover goods against loss or damage while in your vehicle or when being sent via carrier. The insured sum may be limited for each vehicle or consignment. Check that the limit is adequate. up ⇑

Do I need Plant Insurance?

Whether it's an excavator, generator or digger, the theft or breakdown of expensive plant could have serious repercussions for your business. Comprehensive plant insurance will cover your own plant against loss or damage including while temporarily off site, in store or in transit.

If you hire in plant, you're probably responsible for any injury, loss or damage for the hire period. Most plant hire companies won't hire plant out without insurance and you must insure hired plant and equipment for their replacement value. If you're only likely to hire plant for a few days or weeks, then possibly don't include it in your annual cover. Hire companies are happy to loan out plant for a week or a day. Compare the cost and the comprehensiveness of their insurance cover with what your own insurer suggests.

You can also get cover for temporary buildings and site huts. up ⇑

Do I need Plant Hire Insurance?

If you only hire in plant for a few days or weeks throughout the year, consider buying it as and when you need it, as opposed to paying for it annually. You also need to check whether road risk cover is included on plant and machinery in transit. up ⇑

Do Tradesmen Need Engineering Insurance?

Sudden mechanical or electrical breakdown of expensive plant and machinery, eg forklifts, compressors, hoists, could be ruinous in you're in the middle of a contract. This type of cover will help meet the costs of repair/replacement and should include regular engineering inspection services arranged by your insurer.

Mechanical equipment such as lifts, lifting equipment, boilers, etc., must be regularly maintained and inspected by law. If inspections aren't carried out regularly by a competent person, the policy will be void. up ⇑

Do Tradesmen need Key Person Insurance?

Many firms in the building sector operate with just a handful of permanent staff so it's critical to protect the business from loss and disruption to trading if a key employee falls ill or dies. This type of insurance provides money to fund the cost of appointing and training a successor, and compensate for a reduction in profits. up ⇑

Do Tradesmen need Efficacy Insurance?

Insurers often insert an efficacy (ie efficiency) clause in the public liability policy section which means you're not covered for loss or damage as a result of a product failing to perform its function.

For example if an intruder alarm, CCTV or door entry system failed while a customer's premises were being broken into, you could be held liable for any resulting losses. Similarly if a fire alarm installed by you fails to go off in a fire at a customer's premises, you won't be covered for any injury or damage caused. This is a serious omission in cover if you install these types of products, so check the small print of your public liability policy. up ⇑

Do Tradesmen need Contract Works Cover?

Contractors are usually responsible for work and materials on site until a contract is completed and handed back to the owner.

Contract Works Insurance covers property being worked on (eg a new apartment block, shop or office). If the site is damaged in a fire, say, this type of insurance (also known as Contractors All Risks Insurance) can compensate you for materials and labour costs as well as damage to expensive plant. up ⇑

Do I need Business Interruption Insurance?

Also known as Loss of Profits or Consequential Loss, this compensates you for loss of turnover or damage to your property that stops you from trading eg, a fire, theft or flood. If the damage is major it will take time to get the business back to normal. Without Business Interruption cover, your business could face meltdown.

Standard Business Interruption insurance covers the risk of fire, lightning, explosion and hazards such as storm, flood, malicious damage and theft. If one of these risks hits your suppliers' premises, or your customers or public utility providers (eg water, gas, electricity, telecoms) the effect on your business could be serious. You can extend cover to include this.

Some insurers will also cover loss of business income as a result of bomb scares and oil or chemical pollution. Business interruption cover can be a lifeline for your business because it can pay things like rent and wages for employees that remain and redundancy payments to staff you have to let go.

You can also cover loss of income and meet extra outlays such as accountants' fees, clean-up costs and hiring temporary premises.

You can opt for a one or three-year term policy, but it's harder to prove loss of earnings over a 1-year period. The premium is based on estimated gross annual profit. The duration of the cover - maximum indemnity period in insurance speak - is usually a year or more to tide you over until you can trade at the same level as before. Business interruption cover really does make sense and is one of the most valuable types of insurance to buy. up ⇑

Do I Need Products Liability Insurance?

Under the Consumer Protection Act 1987 it's a criminal offense to supply defective consumer goods. Whether it's a fire alarm, an electric radiator, a gas cooker, roof tiles or bricks - if you sell, supply, erect, install, repair, treat, manufacture, and/or test goods and products as part of a trade contract, you could be sued for damage or injury caused by faults in their manufacture or design.

Usually sold as part of Public Liability Insurance, Product liability insurance can cover your legal liabilities for damage or injury caused by defects and meet the cost of expensive compensation claims or repair work.

Tradesmen who carry out repair work such as bricklayers, plumbers, electricians and kitchen and shop fitters usually include this type of insurance in their policy. The standard level of cover is £2m, but you can increase this. up ⇑

Do I need Personal Accident & Sickness Cover?

As a self-employed tradesman being out of work due to an accident or ill health could spell ruin for your business and your personal finances. Also known as Income Protection Insurance, most insurers offer personal accident and sickness cover which will pay out a weekly amount until you get back on your feet or for more serious, long-term conditions, a lump sum. up ⇑

Do I need Income Protection Insurance?

Income protection insurance or payment protection insurance (PPI) is attractive to sole traders and self employed tradesmen because it means there's money coming in if you can't work due to sickness or injury.

It generally pays out a pre-agreed monthly amount for six months to a year to help you to meet financial commitments until you get back on your feet. You can get payment protection cover specifically to meet mortgage payments or loans, but there are policies to cover household expenses too (eg rent, mortgage, utility bills, credit cards).

Depending on the policy it could be anything from 30 to as much as 190 days before payments kick in. Payments are usually backdated to the day you stopped work. Income protection insurance has had a lot of bad press, with a lot of individuals sold policies that didn't pay out as expected. As always read the small print. up ⇑

Do I need Professional Indemnity Insurance?

People get confused between Professional indemnity insurance (PI) and public liability insurance. The latter covers your actions, not your knowledge and skills. Public liability insurance won't protect you against the financial fallout from a professional negligence claim against your business. If you provide professional advice or services for a fee, and if the wrong advice from you or your staff could result in a major loss to clients, then professional liability insurance is worth considering.

It's designed to cover the cost of rectifying work that's defective due to design flaws as well as legal fees and compensation costs. No two businesses are the same, even in the same trade, so there's no one size fits all answer to whether your business needs PI cover.

As a sole trader or small business you may not need professional indemnity insurance, but it makes sense to check that any professional services you buy in are covered by PI.

Some trades are more likely than others to face a costly negligence claim - property developers and contractors who do the design and build, for example, and contracting trades that supply designs but don't carry out the installation or build.

It can take years before neglect, error or omission in professional advice come to light. If you switch PI cover between insurers, check there's no retroactive exclusion so that you're covered for problems with contracts completed before the start of your new policy.

Just as you can take out a retroactive extension to cover claims against contracts carried out before the start of the policy, you can buy a "run-off" policy that provides cover for several years if you close the business or retire.

As well as unintentional negligence, professional indemnity insurance also covers:

• Unintentional infringement of intellectual property rights
• Loss of data or documents entrusted to you
• Unintentional breach of confidence
• Unintentional libel or slander
• Dishonesty

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Do Tradesmen Need Money Insurance?

If you keep a lot of cash on the premises, you'll want to insure it against theft. You can add on theft by an employee, sometimes called Fidelity Guarantee or Employee Dishonesty. If you only have a small payroll, it may not be worth it.

Consider having business money is covered in transit (eg when taking money to or from the bank) and that there's cover for bodily injury to you/your employees following an assault or attempted assault.

Personal assault cover will be particularly relevant to tradesmen who collect cash from customers (eg window cleaner, wheelie bin washer). up ⇑

Do I Need Books Debt insurance?

Books Debt Insurance protects your business against loss of money following theft of books of account or their accidental damage in a fire or flood, say. It covers the cost of working out how much customers owe and the amount of any unpaid debts that can't be tracked down because of loss/damage to your accounts. up ⇑

Do I Need Trade Credit Insurance?

Bad debtors can spell the end for a small business and sole traders in particular. Trade Credit insurance covers against the risk of bad debts and gives you working capital to reduce the blow. This kind of insurance can be a lifeline if you are overly dependent on one or two big companies for contracts as it's designed to cover losses if major customers goes bankrupt or delay payment for work carried out.

Good insurers provide support services in the shape of credit assessment /debt collection management so that you don't waste time chasing payment and can concentrate on the business. The Federation of Master Builders provides members with a free debt recovery service which can make reluctant payers cough up. up ⇑

Do I Need Glass and Sign Insurance?

If your trade premises or offices have expensive windows and signage, you may want this type of insurance to meet the cost of replacing it following accidental or malicious damage. Always look at the small print. It's not always covered under standard premises insurance policies. up ⇑

Do I Need Legal Expenses Insurance?

You may want to take out court action to recover bad debts, resolve a dispute with a customer, or defend a claim for unfair dismissal or racial or sexual discrimination. Taking legal action is expensive and can put a huge financial burden on a business. Legal expenses insurance can cover legal costs such as solicitors' fees and expenses, the cost of barristers, court costs and opponent's costs if the judgement goes against you in civil cases.

The policy cover should also cover the cost of employing accountants and lawyers to defend your rights (eg if your business is under investigation for tax or VAT). up ⇑

Do tradesmen need Directors & Officers insurance?

Directors and senior officers can be held liable for any decisions or actions they take on behalf of their company. This type of insurance is designed to meet the cost of defending you in court and any civil damages awarded against you. As a director or senior manager you could be open to a personal lawsuit which could in theory end in financial disaster as your personal assets are on the line.

The Health & Safety Executive is increasingly coming down hard on directors of companies who breach safety rules. Fines and court costs can run into thousands of pounds. A criminal prosecution against you for manslaughter on the grounds of gross negligence could even result in a jail sentence.

It's not just health & safety issues that could spell the end of your business. Employees, shareholders, suppliers, creditors or competitors could make a claim against you personally, not your business, on matters such as:

• Discrimination - sexual, racial or disability
• Fraud
• Negligence
• Mergers and acquisitions
• Health & safety

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Do I need Employee Travel Insurance?

If you or your employees work abroad, business travel insurance is a necessity so that they are cared for if there's an emergency.

Important documents can go missing as can laptops, and the health and wellbeing of your staff must be a priority. Policies often exclude manual work and there are geographical limits, so check the small print carefully. up ⇑

Do I need Contract/Performance Bond Insurance?

A contract bond is a guarantee that work will be completed on time and to standard. If, for example, a building contractor or supplier defaults on the contract for whatever reason, developers - often local authorities - can claim back a percentage of the cost of the contract from the insurance company.

Many developers, particularly local authorities, expect contractors to take out this type of completion guarantee. If that's the case and you want the contract, then you have no option but to take out a bond to cover the works and treat it as part of the contract cost.

You can get similar insurance to cover the problem of cash retentions by the client where the client demands up to 5% of the contract price. Called a Retention Bond, this type of insurance provides the client with a guarantee of completion, but you keep the cash in your account thus protecting your cash flow. up ⇑

Do I need Latent Defects Insurance?

You can insure your company against the risk of claims from defective materials, design or workmanship which come to light after a development is completed, which is where Latent Defects Insurance comes in. New builds, asphalting, mechanical plant, curtain walling, car park decking etc. can all by covered. up ⇑