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Umbrella company insurance explained

Not only does an umbrella company take care of tasks for the contractor including tax, pay, liaising with the client, admin and paperwork to sorting out statutory benefits, but they also arrange insurance cover. That means one less thing on your plate.


But what insurance is usually provided by the umbrella company? In this guide, Umbrella Search outlines everything contractors need to know about umbrella company insurance.


Why do contractors need insurance?


Let's start by looking at why contractors need to worry about insurance in the first place.


When a client engages the contractor's services, it's important that certain levels of insurance are in place due to the fact that the contractor is not the client's direct employee and therefore isn't covered by their existing insurance policies. Having insurance in place helps to settle matters such as accidents or professional breaches should they occur.


Whether your contract work takes place in an office or on-site, is for a multi-national client or local business, every contractor needs insurance.


There are certain types of insurance that all contractors must have in place in order to carry out the contract work, as well as specific types of insurance only some contractors must take out if they work in particular fields.


So, what types of insurance do contractors need?


Professional Indemnity Insurance


Every contractor must be covered by professional indemnity insurance - whatever sector or field you work in.


Professional indemnity claims usually arise from things such as:


  • Confidentiality breaches – this includes sharing confidential information without the consent of the client

  • infringement of intellectual rights – this can cover a range of instances, such as using content or images from another website or company without permission

  • negligence – this includes instances of the contractor being negligent at work, such as making a careless mistake or offering bad advise

  • defamation – this includes making false claims

  • professional incompetence

When the client brings forward claims against the contractor, they usually centre around financial loss caused by the contractor. Therefore, it is a legal requirement that the contractor be covered with Professional Indemnity Insurance to give the client protection in case a problem arises.


When you sign up with an umbrella company, they will ensure you are covered with Professional Indemnity Insurance so you can rest assured that you're protected.


What is an umbrella company?

Public Liability Insurance


Although public liability insurance isn't a legal requirement, if the contractor is in contact with members of the public through their work, or is required to work on-site, then it is worth taking cover out.


Public liability insurance covers against claims of damage or injury caused by an accident that the contractor has caused to a member of the public or property. After all, although you may do everything by the book, accidents can happen.


For this reason, most clients will require that the contractor is covered by public liability insurance and the umbrella company will organise this as standard.


Employer's Liability Insurance


In the UK, it has been a legal requirement since 1969 that every employer holds a minimum of £5 million policy cover under the Employer's Liability Act.


As contractors are employed by their chosen umbrella company, they can rest assured that they will be covered by the provider's policy.


Employer's Liability insurance covers both the contractor and the employer in cases of injury or illness that arise due to the work the contractor carries out and means that in cases where a court must pay out to the employee, the insurance will cover the cost.


Any umbrella company that doesn't have a policy can be fined up to £2,500 a day.


Other types of insurance


Those are the three main types of insurance that every umbrella company will offer to the contractor.


There are also additional types of insurance that contractors may want to consider, including:


Personal accident insurance – in the instances that the contractor is unable to work due to an accident at work, Personal Accident Insurance provides weekly payouts to the contractor. This gives you a safety net should an accident occur. After all, if you are unable to carry out the contract due to an accident, then it is most probable that you will lose the work. This type of insurance policy will also usually provide a lump sum of money in the instance that death occurs or you are permanently disabled.

Locum insurance – this is specifically geared towards medical contractors, providing them with an extra level of cover and peace of mind


How does an umbrella company help?


Rather than leaving the contractor to work out exactly what insurance they need, as well as the amount of cover they should have, the umbrella company will take on all the hard work for you.


An umbrella company ensures that the contractor is covered with the necessary insurance for the contract at hand, so you can rest assured that should anything out of the ordinary happen, you will be covered. That's just another benefit of working with an umbrella company.


You can read about the other benefits of working with an umbrella company in our handy guide.


Ready to find an umbrella company to work with?


Now you know that an umbrella company will take care of sorting your contractor insurance for you, it may be time to make the move to finding the perfect provider.


At Umbrella Search, we help every contractor find an umbrella company that's just right for them. We work with you to find out what you're looking for from an umbrella company, so we can find the perfect match. Taking the hard work and hours of researching off your plate, we will suggest a list of the best-suited umbrella companies out there. All you need to do is get in touch with one of our team today, and we'll take care of the rest. Ready to find your perfect umbrella company?


Which industry are you contracting in?

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