How much insurance cover do I need?

For any tradesman or contractor, whether self-employed or operating a small business, effective insurance protection is just as important as the tools of the trade. It’s there to give you peace of mind that your reputation and your livelihood will be protected if something goes wrong.

You’ll probably need several different types of insurance cover to fully protect your business – for instance electrical contractors insurance including a wide range of cover from public liability and employers liability to professional indemnity and tools, as well as cover for business vehicles, premises and more.¹

Depending on the types of work you carry out, securing the right cover can often be a little tricky – nobody wants to pay for cover they don’t need, while too little protection could leave you exposed when you need it most.

First, however, you need to work out which contractors insurance covers are right for you.

Which types of insurance do I need?

Leaving aside covers like premises, vans and tools for a moment, there are usually three kinds of insurance cover essential to your work as an electrical contractor – so let’s look at what they are, and some simple scenarios to explain why they are needed:

Public liability insurance

Public liability insurance covers you in the event a member of the public is injured, or damage is caused to their property, at the premises where you are working.¹

For example, you are working at a client’s property and move a sofa to gain access to sockets on the wall. You accidentally knock over your client’s television in the process, resulting in the television being damaged beyond repair. If a legal claim was to follow, public liability insurance would help with legal defence costs and any compensation awarded against you, which you would otherwise be personally liable.

Professional indemnity insurance

Professional indemnity insurance covers any financial loss caused by flawed design work or improper advice, as opposed to accidental damage covered by public liability insurance.¹

As an example, you design a lighting system for a client’s new office, but the specification and design include a flaw which results in additional costs to your client, as well as delays to the project. Your client could take action against you to recover their losses. In this scenario, because the issue relates to professional advice, professional indemnity insurance would help with legal costs and compensation.

Product liability insurance

Product liability covers you in the event someone is harmed, or property is damaged due to products that are sold or supplied by you. It can also include inefficacy cover to protect against any loss or damage to property caused by a product not working the way it should.¹

It would step in to cover legal costs and compensation, for instance if you install an intruder alarm at a client’s offices that later fails to operate during a break-in that leads to the loss of £30,000 worth of stock. In this case, a legal claim against you would be covered by the inefficacy section of a product liability policy.

Other insurance covers

There is another insurance policy that is essential if you employ people, a legal requirement in fact. Employers liability insurance is there to help with the cost of legal defence and compensation if an employee is injured or suffers property damage while at work.

Then, as mentioned above, you might also need cover for tools, vehicles, premises and more – much of which can be included in a single electrical contractors insurance policy along with the covers listed above.¹

How much insurance do I need?

The next thing to consider is the level of protection you need from each cover. To give a simple example, if you have £5,000 worth of tools, you’ll want to make sure your tools cover offers £5,000 worth of protection.

The principle is the same for all insurance covers – so, when it comes to liability covers, you need to make sure your policy reflects the risks, offering enough protection to cover things like legal costs and compensation without leaving you out of pocket.

How much public liability insurance do I need?

The truth is the level of cover you need – whether £2m, £5m or £10m – will depend on the kind of work you carry out and in which locations. The riskier the work or location the more cover you are likely to need.

The same applies to employers liability and professional indemnity insurance and, in truth, the best way to make sure you have the right level of insurance protection – neither over paying nor underinsured – is to speak to a specialist broker like NICEIC Insurance Services for advice.

Am I overpaying for insurance?

There are two main scenarios that could leave you overpaying for insurance. The first is simply buying a level of insurance that is too high for your needs – for instance £10m of public liability cover when £5m would be sufficient.

The second can occur when working as a sub-contractor on a site managed by a larger organisation. In this scenario, it’s possible the main contractor may already have insurance in place that also covers you and your work – if you take out additional insurance to cover that contract you could end up with duplicated or dual cover.²

The best way to avoid this is to fully understand your work and the contract conditions you are operating under. If you think you might be over-insured or doubling up your insurance, check the levels of cover the employer or main contractor for the site has in place² - and, again speak to a specialist broker like NICEIC Insurance Services for advice.

Help is at hand

If you are unsure of the type or amount of insurance cover that’s appropriate for your business, or want help to shape a package of protection that’s right for you, get in touch on 0333 060 4723 or request a call back. Alternatively, if you know what you want, you can get a quote online now.

_Sources

1. _{https://www.niceic-and-elecsa-insurance.com/news-and-information/essential-contractors-insurance-you-cant-afford-to-be-without/}
2. _{https://www.marshcommercial.co.uk/articles/contractors-dual-insurance/}