Business insurance for tradespeople: what cover do you actually need

Insurance is one of those things that feels like wasted money right up until the day you need it. For tradespeople, the stakes are high. One accident on site, one complaint from a client, one tool theft from a van can cost tens of thousands of pounds without the right cover. Yet many sole traders are either underinsured or paying for cover they do not need.

Public liability insurance

Public liability (PL) insurance covers you if you injure a third party or damage their property while working. It is not legally required for sole traders, but in practice it is essential. Most domestic customers expect it. Commercial clients and main contractors will not let you on site without it. Most policies offer £1m, £2m or £5m cover. The majority of tradespeople take £2m as a minimum. If you work on commercial sites or large contracts, £5m is worth the small additional premium.

Employers liability insurance

If you employ anyone, even temporarily, employers liability (EL) insurance is a legal requirement under the Employers Liability (Compulsory Insurance) Act 1969. The minimum cover required by law is £5m, though most policies provide £10m. You must display your EL certificate at your place of work. Failure to have EL insurance can result in a fine of up to £2,500 per day. If you are a sole trader with no employees, you do not need EL insurance.

Professional indemnity insurance

Professional indemnity (PI) insurance covers you if a client claims your advice, design or professional service caused them a financial loss. It is most relevant where design or specification is involved, such as electrical contractors who design systems or heating engineers who specify systems. For most manual trades doing straightforward installation work, PI insurance is not strictly necessary.

Tools and equipment insurance

Tools insurance covers your hand tools, power tools and equipment against theft, damage and loss. Tool theft from vehicles costs the industry hundreds of millions of pounds a year. Check your van or home contents insurance first as some policies include tools cover, but often with low limits (£500 to £1,000). Dedicated tools insurance typically covers tools in transit in your van, tools on site, and tools in storage. Many policies exclude theft from an unattended vehicle unless there are signs of forced entry.

Van insurance

If you use a van for work, you need commercial vehicle insurance rather than standard private car insurance. Driving on a private policy is not valid. Commercial van insurance comes in three levels: third party only, third party fire and theft, and complete. Goods in transit cover is an add-on that covers materials and customer property you are carrying.

Personal accident and income protection

As a sole trader, you get nothing from the government if you cannot work due to illness or injury until you qualify for Employment and Support Allowance. Personal accident insurance pays a lump sum for specified injuries. Income protection insurance pays a monthly income if you cannot work, typically after a four or thirteen week waiting period. Use the day rate calculator to work out how much income you stand to lose per day off work.

Contract works insurance

Contract works insurance covers work in progress against damage while you are working on it. If fire or flood damages a renovation you have been doing for three months, it pays to reinstate that work. Particularly relevant for larger projects or where the client is not insuring the work in progress themselves.

What most tradespeople actually need

For a typical self-employed tradesperson on domestic and small commercial jobs, a standard package covers: public liability (minimum £2m, ideally £5m), tools and equipment cover, and contract works cover. Add employers liability if you take on workers. Add van insurance through a specialist commercial insurer. Consider income protection if your finances depend on you working.

FAQ

Is public liability insurance a legal requirement for tradespeople?

No, it is not legally required for sole traders. But most clients and main contractors will not allow you on site without it.

When do I legally need employers liability insurance?

As soon as you employ anyone, including temporary workers or apprentices. The minimum cover required by law is £5m. Failure to have it can result in fines of up to £2,500 per day.

Does my home contents insurance cover my tools?

Some policies include limited tools cover but limits are usually low and may not cover tools left in a van or used for work. Check your policy wording carefully.

What is contract works insurance?

Contract works insurance covers work in progress against damage while you are on site. It pays to reinstate work if damaged before completion. It is different from public liability, which covers damage you cause to third parties.

I am a CIS subcontractor. Do I still need my own insurance?

Yes. The main contractor policy does not automatically cover you as a subcontractor. Always check what their policy covers and always have your own public liability cover.