What is self-employed insurance?

Self-employed insurance provides cover for those who work for themselves rather than those who work for an employer. The very least level a self-employed business person should invest in are public liability insurance and professional indemnity. If you employ other workers it is usually a requirement in law that you take out employers’ liability if you have one employee or more. Such policies can cover the cost of replacing vital equipment, depending on the type of cover that is taken out. There are various other levels of protection that can also be included in a self-employed insurance policy.

What types of insurance are required by the self-employed?

There are three core types of insurance that insurers offer that it would be advisable to consider if you are self-employed. Particularly if you work with the public, have premises or work in other people’s premises :

• Public liability insurance: This is an important cover for professionals who are self-employed or working as a freelancer. This can project you if someone is injured or has their property damaged due to your business. This is an essential insurance for contractors, consultants and all kinds of small businesses. The cost of this policy should be included in your basic business plan.
• Professional indemnity insurance: This is vital if you are a small business or independent contractor who gives advice or others services to other businesses. It can cover you in the event of you giving faulty advice that causes harm or financial loss to other businesses. Self-employed professions where this insurance might be advisable include journalists, doctors, architects, solicitors, engineers, accountant, business and financial advisors.
• Employers’ liability insurance: If you have employees, you are legally required to take out employers’ liability insurance. As well as people employed by you, it will also cover the business if you have contractors working for you, casual staff or temporary staff employed on your premises. This will offer protection to your workers if they suffer injury or become seriously ill while in your employ.

If you work from home then you might want to make sure that your buildings and contents insurance covers your equipment, to protect it from the threats of theft, fire and flood.

What additional insurances are available to the self-employed?

Depending on the nature of your business, you may wish to take out other specific insurances on yourself or your equipment. It is not unusual for self-employed people to take out income protection insurance and critical illness cover in case they suffer an injury or illness that makes leaves them unable to work. For those with dependants or children, life insurance and personal accident cover might also be something to consider. Here are some of the additional insurances that you might be able to build into your business insurance policy:

• Income protection insurance: This is a long-term measure that might be added to your policy at a small additional expense depending on your projected income. An income protection policy is designed to provide you with a portion of your income in case of a serious sickness or injury that means you can’t work.
• Critical illness cover: This differs from income protection insurance in that it is designed to cover you if you suffer from an illness named on your policy. It usually pays out as a tax-free lump sum or compensation. Such illnesses usually include some cancers, stroke and heart attacks. Only selected conditions are covered by such policies, common complaints like back problems and stress are not included in most illness cover.
• Health insurance: Private medical insurance could be an add-on benefit of some employment insurance packages. Some self-employed people take out private health insurance, as they don’t want to lose out on income if they are waiting for NHS treatment.
• Legal expenses insurance: This would be something you would need to claim if you need the services of legal professionals, for example in the invent of legal action covering solicitors’ fees and the cost of any court action. This kind of cover includes things like employment disputes, property protection and contract disputes.

What specialist insurance is available for particular self-employed jobs?

Specialist insurance is available for certain professions and situations:

• Motor insurance: If you are employed to drive or to transport goods, you need to make sure your motor insurance includes business use. Check with your insurer to see if you need to upgrade your motor insurance policy.
• Equipment insurance: If you use specialist equipment in your job, the cost of replacing it can be covered by your insurer. There are also policies to cover the cost of replacing IT equipment in case of breakdown. This might be particularly important to self-employed workers who rely on their computers, laptops or smart phones and who might need to claim for damage or loss. If you are a plumber, builder, electrician or other form of tradesman your tools can sometimes be added to public liability policies, so it is worth asking your provider what is included in your cover.
• Goods-in-transit insurance: If your business involves sending goods or products around the country then it is worth looking at getting them covered in case of losses, damage or delays. If you send goods or products abroad this might need a separate arrangement.
• Business travel insurance: If you or your team travel abroad for work then look into special business travel insurance policies so that your people and their equipment have adequate cover when on the move.

How do the self-employed pay National Insurance Contributions?

As well as insurance policies from insurance companies, sole traders and those in self-employment need to be registered for National Insurance, if they are earning above the required threshold. You need to pay National Insurance is you wish to qualify for certain benefits including the State Pension. If you complete a self-assessment tax return for HMRC, at the end of each tax year, your payment will be calculated at the time you submit your return. If you do not complete a self-assessment for your tax calculation, then HMRC will send you a bill for your NI contribution. If for some reason you miss payments to your National Insurance it is wise to pay up your shortfall by voluntary contribution so that you do not lose out on your future benefits. If at any time during self-employment you are employed on a pay roll, then look out for your National Insurance payments on your wage slip as they should be calculated as part of the Pay As You Earn scheme.