Clients often ask us, “Do I need insurance for my trade business?” The answer is most definitely a resounding yes! But, if you need convincing, read on. We’ve asked our good friend, Ian Gardiner, to tell us more about insurance for trade businesses.
Ian has 40 years of experience in the insurance industry in Claims, Underwriting, and Broking. As a Client Director with Konsileo, his job is to talk to his clients about their businesses. He’ll find out what they do and how they do it. He will also get behind the financials, as these usually drive the premium insurance companies charge for the coverage. The next steps are to highlight and discuss the risks they face in their day-to-day operations. Finally, he’ll recommend insurance policies to cover those where possible.
Do I need insurance for my trade business?
An interview with Ian Gardiner.
Q: Why is business insurance essential for trade businesses?
IG: For many trades, without adequate Public Liability cover, many main contractors won’t allow you on to site. This means losing out on potentially lucrative sub-contract work. The public is also wary about engaging tradesmen of any kind without proof of insurance. So, at a minimum, every trade business should have this coverage in place. Also, if you engage staff, even on a self-employed labour-only basis, it is a legal requirement to have employer liability insurance. Tradespeople can also insure a build while in progress under a Contract Works cover. This also covers any materials for incorporation into the build on site, as well as plant and tools, including hired plant.
Q: What are the most common types of insurance policies that trade businesses should consider?
IG: The most common types of cover for trade businesses are Tradesmen and Contractors Combined. Insurers and brokers generally determine the most suitable by turnover and/or the number of bodies working on-site. The insurance premiums for Tradesman policies are calculated based on the number of people covered under the policy. These policies provide Employer and Public Liability cover. Insurers can also extend them to include Contract Works, Employee Tools, and Owned and Hired Plant.
Q: How do insurance requirements vary between different types of trade businesses?
IG: It is true that a builder will face very different risks than a cleaning contractor. Cleaners need cover for any damage to the surfaces they’re working on, so their cover must have this extension. A similar principle applies to external cleaners, and a standard Tradesman policy will always exclude damage to property being worked upon.
Electrical contractors can vary in the work that they take on. For example, not all will work with three-phase installations, and insurers will always look to exclude this if they’re told that the tradesman doesn’t do it. Similarly, for plumbing and heating contractors, those with ‘gas safe’ accreditation have a different rating than those who don’t work on gas boilers. Roofers will always be working at height, and so will not have the height restrictions that most policies will have.
Q: What are some common misconceptions tradespeople might have about business insurance?
IG: Probably the most common relates to the definition of labour-only sub-contractors and bona fide sub-contractors. The classic misconception is that if a tradesperson is self-employed, the main contractor doesn’t require Employer Liability cover due to their not being on PAYE. This is incorrect because if they are under another contractor’s direct supervision, working on their contract, the HSE regards that contractor as employed. This is because the main contractor is paying for their labour and the sub-contractor is not supplying materials.
A bona fide sub-contractor brought in to do a specific job on a build, e.g. an electrician, plumber, roofer, etc., will work under their own supervision, supply all the materials for their part of the job and invoice the main contractor for labour and materials.
Failure to get this right can not only leave a tradesman potentially uninsured but also open to prosecution by the Health and Safety Executive.
Q: How can trade businesses determine the appropriate level of coverage they need? What factors should they consider when choosing a policy?
IG: The main consideration should be the nature of the contracts that they’re working on and the financial implications if a major incident were to occur. If a trade business tends to work on domestic contracts, it should consider the typical value of the properties to determine the level of cover required.
However, if they are involved with commercial or industrial work, the cost of their actions, such as shutting down a major production line or causing road closures in inner-city areas, is likely to be significant. Insurers also regard work in schools and hospitals as higher risk, and again, contractors should consider higher Public Liability limits. Local authorities tend to insist on £10million as a minimum.
Q: In your experience, how does having proper business insurance contribute to the long-term success and growth of a trade business?
IG: Having the right business insurance gives potential customers the confidence to use a particular trade business. They can be safe knowing that if anything goes wrong, their contractor has protection. It also opens the doors to listing the business on directory sites such as Checkatrade.com and working for local developers on major local projects. Putting evidence of insurance on a website is also likely to lead to more work.
We hope Ian has answered your question, “Do I need insurance for my trade business?” If you need any further advice, contact Ian on LinkedIn. Konsileo operates slightly differently from some brokers.
They like to meet customers face to face to ensure they fully understand what you do. This helps them ensure the correct cover is in place. They also have access to over 100 different insurers, enabling them to get the most competitive price. Their dedicated client portal, Riskube, gives clients access to all their policy details at the click of a mouse. It also has all the risk information they hold for their clients and the option to download any necessary insurance documents rather than searching through folders and emails on their computers.
If you have any questions about budgeting for insurance premiums, we can help. Talk to us about bookkeeping. We ensure you have the information you need to make the best decisions for your company.