What is Contractor Public Liability Insurance?

For contractors working under the Construction Industry Scheme (CIS), protecting your business goes beyond simply managing your taxes correctly. It’s also about safeguarding yourself from the unexpected. One crucial aspect of this protection is having the right insurance in place, including public liability insurance.

Here at Contracteise, we’re experts in CIS and regularly help keep contractors and subcontractors protected. We do this by ensuring CIS compliance with services such as payroll audits that prevent costly HMRC reclassification risks.

As well as this, we’re experts in insurance and in this blog, we’ll break down what public liability insurance is and why it’s important for CIS contractors.

What is public liability insurance?

Public liability insurance is a type of business insurance that is designed to cover the cost of claims made by third parties for injury or property damage caused by your business activities. In the case of contractors, this could be damage caused on a worksite, an accident involving a member of the public or any other incident where your work has inadvertently caused loss or harm to someone who is not employed by your business.

Typically, the insurance will cover:

• Injury: If a member of the public trips over equipment near a construction site or gets injured in any other way, public liability insurance will cover the costs of claims made against you.

• Property damage: If you accidentally damage a client’s property, for instance, smashing a window when working on-site, this insurance will help cover the cost of any repairs or replacements.

• Legal fees: If a claim goes to court, public liability insurance can cover the costs of your legal representation and any compensation that is awarded against you.

In a sector like construction, where work often involves working with other people’s property and there is a physical risk, this type of insurance is especially important.

Public liability insurance for contractors

Contractors face unique risks on the job, especially when working on building sites with heavy equipment and tools. With this in mind, whether you’re a sole trader or own a large business, public liability insurance is an important requirement to ensure you’re financially protected in the event of an accident. Without it, the costs could be devastating.

Some of the main benefits of public liability insurance for contractors include:

• Financial protection: Legal bills can run into the thousands or even the millions of pounds. Public liability insurance protects you from footing the entire bill, which could ruin your livelihood.

• Client confidence - Many clients - especially larger construction companies - will only hire contractors who are fully insured.

• Contractual requirement: In many cases, having public liability insurance in place is a mandatory contractual requirement. Without it, it’s likely you’ll be overlooked for many projects.

• Peace of mind: Knowing you’re protected allows you to focus on the job at hand without having to worry about unexpected costs.

Do contractors need public liability insurance?

Yes, it’s strongly recommended that all contractors have a public liability insurance policy in place. While it is not a legal requirement, you won’t be fined by HMRC or barred from working if you don’t have it, it is still absolutely essential.

This is because:

• Contractual obligations - Many construction firms will simply refuse to work with any contractor that doesn’t have this insurance in place. It is often a mandatory part of all contracts.

• Industry standards - In construction, having a public liability insurance policy is seen as best practice. It shows you are trustworthy, professional and serious about the risks of your profession.

• Protecting your future - A single claim can bankrupt a business, so having insurance is the best way to protect your future.

Even though it’s not required by law, most CIS contractors make the smart choice to have public liability insurance. It’s not just about protecting others, it’s about protecting yourself.

What level of public liability insurance do I need?

The level of cover you need will depend on your business activities, the size and types of projects you take on and the stipulations in your client’s contracts. Cover of at least £5 million is considered the industry standard for many contractors and will usually be the level required.

However, if you’re working on projects for high-value clients or those that involve significant risk or public exposure, then getting cover in excess of £10 million may be more suitable.

It’s always better to over-insure than under-insure, especially when working in environments where the cost of claims can be high. Take some time checking the details of contracts before accepting a job to make sure your coverage meets the requirements.

What is employers’ liability insurance?

Unlike public liability insurance, employers’ liability insurance is a legal requirement in the UK if you employ anyone - even on a casual basis.

This type of insurance covers claims made by employees if they are injured or become ill due to their work. For example, if you hire a labourer who is injured due to faulty equipment, they could claim against you. Employers’ liability insurance will cover the legal costs of this as well as any compensation you have to pay.

If you’re a sole trader, you don’t need this insurance, but the very moment you hire someone, even just a part-time worker, it then becomes mandatory.

Final Thoughts

In summary, public liability insurance is an essential layer of protection for contractors, including those working under the Construction Industry Scheme (CIS). While it is not a legal requirement, it is a crucial safeguard against third-party claims that could otherwise put your livelihood at risk.

Whether you’re just starting out as a self-employed contractor or run a small CIS-registered business, having the right level of cover ensures that you can focus on your work without having to worry about the cost of accidents.

Here at Contractwise, we’re here to support contractors in any way we can. As well as ensuring your payroll is in the best shape, we will also help you stay fully compliant with all your CIS obligations. To find out more, contact our team today.