Contractor Insurances for UK Based Contractors
You need to get contractor insurances. We detail why you do and what insurances you will need as a contractor.
Contracting is a risky business compared to being in a permanent job.
One is almost mollycoddled in a permanent job. If you are off ill they will give you sick pay. If you get pregnant they will give you maternity leave and pay.
If you go on holiday they will pay you too. If you are just off for Christmas, Easter or one of the bank holidays, the cash keeps rolling into your account.
There is no problem in getting a mortgage as you have a steady stream of income. You are unlikely to spend part of the year on the bench.
If you get sick or injured for a long time they will still pay you. When you retire they will still pay you a major portion of what they paid you before. If you die your dependents will either get continued pension payments or a one-off lump sum.
You will never by chased by HMRC for back tax like IR35.
IT Contracting a Risky Business
It sounds a pretty cushy life. The only financial downside is that they oay you about half of what a contractor gets. Limited company contractors can turn that into an even bigger financial difference by offsetting a whole load of expenses against tax.
Life is far more risky for an IT Contractor. There’s no holiday pay for them and, if they are ill, they still have to pay their bills even if they have no income coming in.
They could suddenly become the object of an IR35 investigation which could take years and end up in them paying tens of thousands of pounds in back tax.
If they fall behind in their mortgage and car payments they could lose both. Many contractors have lost their partners and children because of this.
When they retire they are only entitled to the state pension and if they die their dependents are on their own.
Financial Benefits of IT Contracting
So, why would anybody do this?
The answer is financial. They get lots more money for doing it than if they were a permanent employee. It is generally the risk takers who become IT Contractors and the risk averse who stay as permanent employees.
However, IT contractors can cut the risk to themselves by taking out certain insurances and pensions.
The cost is not too great. They can still earn much more than a permanent employee. However, you can still obtain most of the benefits that a permanent employee has.
So, what sort of insurances does an IT Contractor need to protect himself, or herself, against financial hard times?
The following is a list of the insurances available to contractors which will help them to sleep more easily at night in what is a risky profession. Click on them for more information or to apply.
Contractor Insurances needed by British Based Contractors
If they ever investigate you for IR35 tax then this fully covers you.
If you make a mistake at work which costs your client a lot of money, they can sue you. Many employers are insisting, now, that contractors have liability insurance even to get a contract.
This protects your income when you are hit by injury or long term illness. Without it you will have no income but the same mortgage and car payment bills etc.
God forbid that you should die. However, if you do no one will pay your dependents any income. That’s unless you have taken out Life Cover. If you have, they will continue to receive income.
This pays out if you have a long term illness which stops you working but doesn’t kill you. It will provide income and allow you to get medical care too.
Their companies cater well for permanent staff when it comes to generous pensions after they retire. Contractors need to take out a good pension so that they can receive the same (or better) benefits.
Contractors can save tax and also build up a tasty nest egg by using ISAs.
Contractors are in a very risky business. They can cut down on a lot of the risks, though, by taking out the right contractor insurance and pensions. They will still keep much more of their income than permanent employees.
It’s well worth getting the right contractor insurances.