As a contractor, you don’t enjoy the benefits and protection of being an employee. Instead, you contract your services out to your business clients. So, when it comes to protecting your business interests, it’s vital that you think about the potential risks of trading as a contractor and put the relevant insurance cover in place.
Let’s examine why contractor insurance is needed, what protection it provides and the unique mix of policies you might need within a contractor insurance package.
What is contractor insurance and why is it important?
Contractor insurance is a kind of specialised business insurance that provides combined cover tailored to the needs of contractors.
This combined package of different insurance policies protects contractors, both sole traders and limited companies, against third-party claims from customers, damage to a client’s property, tool and plant losses and professional mistakes.
Many corporate clients, principal contractors and site rules will stipulate that business insurance is required for all contractors. As such, having contractor insurance in place will help you win tenders and meet your contractual conditions.
How do you cover the cost of higher insurance requirements?
If you win a new contract and the client mandates a higher level of insurance cover, this can often work out to be a costly upgrade.
If your cash flow is limited and these new insurance costs could prove to be problematic, one way around the issue is to take out a short-term business loan.
Flexible business funding, like an iwoca Business Loan, can help you fund the upfront cost. You borrow only what you need, repay early with no fees and keep cash free for covering the costs of labour and raw materials, etc.
Is contractor insurance a legal requirement in the UK?
Employers’ liability insurance is a mandatory legal requirement if you employ anyone, including many labour-only subcontractors. Other covers, such as public liability insurance, professional indemnity insurance and contract works cover, aren’t legal requirements but are often contractually required by clients.
What risks does contractor insurance protect against?
Contractor insurance protects you against the primary risks you’ll face when working on a client’s site. This will include third-party injury, property damage on site, damage to works or materials and the theft of your tools or plant.
It will also usually cover you for claims made relating to errors in design and advice, and business interruption cover and legal costs insurance to protect your finances.
What types of contractor insurance cover are available?
Contractor insurance is made up of a bundle of associated policies which, when combined, provide the core protection you need when trading as a contractor.
Let’s explore the different types of policy and the types of cover they provide.
- Public liability insurance: This policy covers your legal liability for accidental injury or property damage caused to a third party while performing work. It will usually protect you against claims from your client or a member of the public and will cover the costs of paying for legal fees and compensation.
- Employers’ liability insurance: This cover is a legal requirement for contractors with staff, protecting the business from claims when an employee is injured or becomes ill as a result of the work they do for the company.
- Contract works insurance: This policy is essential for construction, covering you against physical loss or damage to the project itself, including works-in-progress, materials and temporary structures, before completion.
- Owned and hired-in plant insurance: These two different policies protect valuable plant and machinery against theft or damage on site. Owned plant covers the assets belonging to you, while hired-in insurance covers plant that you’ve hired from a third-party. It crucially includes cover for the continuing hire charges payable to the rental company.
- Professional indemnity insurance (PI): PI protects you against claims that arise from a financial loss suffered by your client due to a proven error in advice, specification or design provided during the contract.
- Tools and equipment insurance: Covers the costs of replacing or repairing portable tools and non-fixed equipment that are frequently used on site or are stolen while being transported between jobs, ensuring work continuity.
- Business interruption insurance and Legal expenses cover: Business interruption insurance compensates you for lost income if your work stops due to an insured event. Legal expenses insurance covers your fees for any tax disputes, contractual disputes or employment issues.
- Personal accident insurance: This policy pays a lump sum or weekly benefit to you if you suffer a severe accidental injury that prevents you from being able to work and earn income.
What’s the difference between public liability and professional indemnity?
Public liability insurance covers you against claims made due to physical injury or property damage caused by your operations.
Professional indemnity covers you against financial loss that arises from your professional advice, design services or customised specifications, even if no physical damage occurs.
Contractor insurance for specific trades and industries
A standard contractor insurance package is designed to meet the typical requirements of the average contractor. However, if you work in a specialised or specific industry, you may need cover that’s tailored to this sector.
We’ve outlined some of the more common trade-specific contractor insurance types:
- Construction and civil engineering: You’ll need higher public liability limits, contract works cover and specific endorsements for hot-works (welding, etc.) and working at heights or depths. The insurance policies must also satisfy your principal contractor’s requirements for major contracts – e.g., Joint Contracts Tribunal (JCT) and New Engineering Contract (NEC) terms.
- Mechanical and electrical: Your policies will need testing and commissioning extensions to cover any errors on the job. Efficacy cover protects against a completed system failing to perform its intended function, alongside cover for sensitive calibration equipment.
- Decorators and fit-out: Crucially, you’ll need professional indemnity cover and tools cover when you’re working at the clients’ premises. Treatment risk insurance may be required to protect against damage caused by the work process, with standard restrictions for working at height activities.
- Groundworks and roofing: Policies are subject to strict depth and height warranties and you’ll require specialist cover for potential collapse of roofs and damage to underground services (pipes, cables) during excavation work.
- Consulting and design & build contractors: You’ll need stronger professional indemnity (PI) limits and specific compliance regarding collateral warranties, which extend liability duties to third parties (like building owners or funders).
In addition to customising your policies to the needs of your sector, it’s also important to tailor the coverage limits to the size of the project and client exposure.
Be sure to verify whether the project involves bona fide or labour-only subcontractor arrangements and the different insurance requirements that will be needed for both types of contractors.
How much does contractor insurance cost?
The cost of contractor insurance is highly variable and will be driven by the specific policies and liability limits required for your industry and your particular business.
A specialist insurer, like SimplyBusiness, has contractor insurance prices starting from £5.64 p/month. But this base price will almost certainly need to have additional cover added to tailor it to the specific needs of your contractor business.
| Business type |
Included policies |
Price per month |
A fencing contractor working on residential properties.
- 4–5 years’ experience
- Sole trader
- No employees
- Based in Telford
|
- Public liability: £1,000,000
- Employers’ liability: Not included
- Tools insurance: Not included
|
£13.35 / month*
£133.52 / year*
|
A small commercial flooring contracting company working in the local area.
- 5+ years’ experience
- Limited company
- 2 employees
- Based in Norwich
|
- Public liability: £5,000,000
- Employers’ liability: £10,000,000
- Tools insurance: £8,000
|
£110.28 / month*
£1,102.83 / year*
|
*Policies and prices correct as of November 2025 as quoted on the SimplyBusiness website
What are the key drivers of your premium?
A number of factors will drive the package price you pay for your contractor insurance.
Let’s explore eight of the key drivers of price:
- Trade and industry risk: Premiums are higher for trades with greater risk of catastrophic loss, such as roofing or demolition. If your business carries out a less hazardous trade, like internal fit-out work, your premium will be lower.
- Turnover and payroll size: Your turnover and payroll numbers reflect the scale of your operations. A higher turnover and a larger payroll increase the exposure to both liability claims and mandated employers' liability risk. As a result, this higher exposure will result in a higher premium and end price.
- Claims history: Any prior claims, especially those relating to public or employers' liability, will signify an elevated future risk to the insurer. This adverse history inevitably leads to a substantial increase in renewal premiums.
- Extensions for height/depth and hot-works: Specific high-risk activities, such as working above ten metres or using welding gear, must be declared and specifically insured. This will increase the base policy price.
- Plant and tool values: The total replacement cost of owned machinery, tools and temporary site structures will dictate your tool cover limit. Higher values will push up your overall premium.
- Professional indemnity limit: If you’re providing design or consultancy services, a higher indemnity limit (e.g., £5 million versus £1 million) means the insurer faces greater financial loss exposure, increasing that policy’s cost.
- Site security: The security measures implemented on sites and premises (e.g., locked containers, alarms, CCTV) are factored into the premium cost. Having enhanced security controls reduces the likelihood of theft or vandalism claims, meaning your insurer will offer a discounted price for your cover.
- Risk Assessment and Method Statements (RAMS): While not a direct pricing factor, the existence of comprehensive, documented RAMS demonstrates a commitment to risk management, which can positively influence an insurance underwriter's view and pricing decision.
What’s the usual structure for a contractor insurance package?
Public liability insurance and employers’ liability cover will typically be the foundational policies in your contractor insurance package.
To this base, you can then add contract works cover, plant cover, tools insurance and professional indemnity insurance as needed.
What can you do to save money on the price of contractor insurance?
You’ll usually save money by paying the annual premium in one lump sum. Paying monthly will be more expensive as insurers are essentially extending a loan to you for the cost of the insurance, with interest and fees added to the total amount paid.
Other steps you can take to reduce the cost include:
- Agreeing to a higher excess when making a claim
- Joining accredited health and safety (H&S) schemes, such as SSIP or CHAS
- Boosting your security with CCTV, tool marking and secure lock-ups
- Providing H&S training for your staff, if you have any
- Keeping good records and documentation to share when making a claim.
Paying your premium annually is the most effective way to lower the price of your premium. Taking out an iwoca Business Loan gives you the capital to pay this one-off insurance cost, with funds left over to cover raw materials and payroll costs.
How to get the right contractor insurance cover for your business
Before you sign up with an insurer, it’s important to do some research of the current contractor insurance market. This helps you understand the different policies included and the variances in cover and premiums between insurers.
Before you sign on the dotted line:
- Prepare details: Document all your activities, accurately splitting your turnover between manual and clerical work. You should also note specific project values and detail all necessary height/depth work limits and claims history.
- Compare like-for-like: Always compare quotes based on identical indemnity limits (e.g., £5M public liability) and check key contract endorsements like efficacy, hot-works and coverage limitations in your territory.
- Evidence and compliance: Collect current Certificates of Insurance (COIs) from all subcontractors and maintain rigorous records of all RAMS, training logs and equipment test certificates to satisfy the insurer’s underwriters.
- Broker vs direct: Use a specialist insurance broker for complex trades or high-risk activities where bespoke cover is needed. You can rely on online quotes for simpler, lower-risk standard contract work.
Ultimately, finding the ideal contractor insurance is down to knowing your needs as a trade, doing your homework and having the relevant coverage for each project.
iwoca: The simple way to fund your contractor insurance costs
Paying the premium for your contractor insurance upfront is the easiest way to pay a cost-effective price. An iwoca Business Loan gives you a fast injection of working capital to pay your premium and cover the overheads for your next project or contract.
With an iwoca Business Loan, you can:
- Borrow from £1,000 to £1 million
- Pay it back between 1 day and 60 months
- Pay no early repayment fees
If you’re ready to protect your contractor business (and have cash leftover to reinvest in the company) come and talk to iwoca about a flexible business loan.
Apply for an iwoca Business Loan
