If you’re a recruiter engaging CIS contractors, it’s likely that you’ll see this question on a regular basis. Your contractors don’t want to incur unnecessary costs, but at the same time they need to ensure they have appropriate cover. Insurance is a cost that your contractors will need to plan for, and it’s important that they get the right advice. So, do CIS contractors need to purchase insurance, and if so, what do they need it for?
Why do CIS contractors need insurance?
There are two main reasons for your CIS contractors to purchase professional insurance; to protect themselves and to protect your clients. Often end clients will insist that contractors have a minimum level of insurance cover. Even if the contract doesn’t call for specific insurance, it’s still important that your contractors are covered for potential liabilities, and against interruptions to their income.
If you refer your CIS contractors to Orange Genie Construction, they will be covered by our Public Liability and Professional Indemnity insurance, and will not need to purchase their own.
Insurance to protect the client
As your CIS contractors are self-employed, they are personally liable for mistakes they make. While claims are rare, if a mistake causes the client to incur costs, the liability can be very expensive. This is why the vast majority of end clients will insist on a minimum level of cover on most contracts.
Your CIS contractors will usually need:
Public Liability Insurance
Public liability insurance covers your contractors if their activities cause damage to someone else’s property or result in someone being injured or killed. It can cover legal costs and any compensation they have to pay.
Professional Indemnity Insurance
Professional indemnity insurance covers your contractors in case their work, service or advice causes your clients to suffer a loss, whether that loss be financial or reputational.
Examples of possible claims include:
Negligence: If your contractor gives incorrect advice or makes a mistake
Defamation: If they produce or support libellous statements about your client
Breach of confidence: If they share sensitive information
Loss or damage: if documents or other property are lost or damaged while in the contractor’s care
Insurance to protect your contractors
Self-employed contractors are not paid when they don’t work, so if something happens to stop them working it could leave them in trouble. Many contractors purchase insurance to protect their income in the event that an accident or illness prevents them from working.
Contractor Personal Accident Cover
Personal accident cover pays either a lump sum or a regular payment if your contractor is unable to work due to an occupational accident. This usually means they would need to be at work, or travelling to or from work, when the accident occurred in order to be able to claim.
Income protection
Income protection insurance covers a wider range of possibilities, paying a pre-agreed monthly payment while the contractor is unable to work due to illness or injury. Often there is a “deferred period” before the policy starts to pay.
Contractors should take care that the policy covers them for being unable to carry out their own occupation. If this isn’t stated the policy may not pay out unless they’re unable to work in any job.
Should your CIS contractors consider unemployment insurance?
Your CIS contractors are self-employed, not employed, so they will never be able to claim for a loss of employment. Obviously, your contractors don’t want to pay for insurance that will not pay out if they need it, so we advise that they avoid unemployment insurance.
Where to refer your contractors for further information?
If your contractors require additional insurance, our partners, Kingsbridge Insurance, specialise in contractor insurance, and will be able to advise based on their needs and circumstances.
If you have any questions or if we can help in any way, please call our expert team on 01296 468 483 or email info@orangegenie.com.