Why contractor insurance matters
When contractors work on your premises or on your behalf, their actions create risks that could become your problem. A contractor who damages property, injures someone, or makes a professional error can trigger claims that land on your doorstep – especially if they lack adequate insurance to cover the loss themselves.
Checking contractor insurance requirements protects you from being left holding the bill when things go wrong. It also ensures contractors can actually deliver on their obligations rather than disappearing when faced with a claim they cannot afford.
This is not about bureaucracy. It is about understanding who carries which risks and ensuring everyone involved can meet their responsibilities.
Key insurance types to verify
Public liability insurance
Covers claims from third parties for injury or property damage caused by the contractor's activities. If a contractor's work injures a visitor or damages property, public liability responds.
What to check:
- Policy is current (check dates)
- Cover level is adequate for the work (typically £1m to £10m depending on risk)
- Policy covers the specific activities being performed
- No exclusions that would void cover for your project
Typical minimum levels:
- Low risk work (consultancy, office services): £1m to £2m
- Medium risk work (maintenance, light construction): £2m to £5m
- High risk work (major construction, hazardous activities): £5m to £10m+
Employers liability insurance
Required by law for any contractor who employs staff. Covers claims from employees injured in the course of their work. The legal minimum is £5 million, though most policies provide £10 million.
What to check:
- Certificate is current and displayed (legal requirement)
- Cover is at least £5m (£10m is standard)
- All employees are covered (including temporary and agency workers)
Exception: Sole traders with no employees do not need employers liability. But verify they genuinely have no employees, including family members who help out.
Professional indemnity insurance
Covers claims arising from professional negligence, errors, or omissions in advice or services. Essential for contractors providing design, consultancy, or specialist professional services.
What to check:
- Policy covers the specific professional services being provided
- Cover level matches the potential exposure
- Policy is on a claims-made basis (most are) – they need to maintain cover even after work completes
- Retroactive date covers previous work if relevant
Typical minimum levels:
- Small consultancy projects: £250k to £500k
- Significant advisory work: £1m to £2m
- Major design or consultancy: £2m to £10m+
Related reading: Supplier compliance checklist for UK businesses
Contractor all risks insurance
For construction and installation projects, this covers physical damage to the works themselves, materials, and temporary works. Important for projects where significant value is at risk during construction.
Motor insurance
If contractors use vehicles for your work, verify they have appropriate motor insurance covering business use. Personal policies often exclude commercial activities.
How to verify insurance properly
Request certificates, not just claims
Anyone can claim to have insurance. Request the actual certificate or policy schedule. For employers liability, the certificate must be displayed at premises – but you should have a copy for your records.
Check dates carefully
Policies have start and end dates. A certificate showing last year's dates proves nothing about current cover. Check that cover extends through the period of work.
Verify the insurer is legitimate
Check the insurer is authorised by the Financial Conduct Authority at the FCA register. Unknown insurers may not pay when claims arise.
Confirm the policyholder matches
The insurance must be in the name of the contractor entity you are engaging. A certificate in a director's personal name or a different company name may not cover work done for you.
Watch for exclusions
Policies often contain exclusions that limit cover. Common exclusions include certain activities, geographic limitations, or work above specified values. Ensure the policy covers what your contractor will actually do.
See how it works: MySupplierList stores insurance documents and alerts you before expiry dates.
Setting appropriate requirements
Match requirements to risk
A window cleaner does not need £10 million public liability. A construction contractor does. Set requirements proportionate to the risks involved.
Consider your own insurance
Your own policies may have requirements about contractor insurance. Check what your insurers expect – failing to verify contractor cover could affect your own claims.
Be consistent
Apply the same standards to all contractors doing similar work. Inconsistent requirements create gaps and confusion.
Document your requirements
Include insurance requirements in contractor agreements and purchase orders. This creates clear expectations and contractual leverage if cover lapses.
Ongoing monitoring
Checking insurance once is not enough. Policies expire. Contractors change insurers or let cover lapse. Ongoing monitoring catches problems before they become yours.
Track expiry dates
Record when each contractor's insurance expires. Request renewed certificates before expiry.
Annual recertification
For regular contractors, require annual submission of current insurance documents. Make this part of your supplier review process.
Check before high-risk work
Before major projects or particularly hazardous work, verify insurance is current and adequate. Do not assume last year's certificate still applies.
Explore the platform: MySupplierList automates expiry tracking and renewal reminders.
What if a contractor lacks adequate insurance?
Do not proceed without resolution
Working with inadequately insured contractors exposes you to risk. Either they obtain appropriate cover, you accept the risk explicitly (and adjust your own insurance), or you use a different contractor.
Consider your own exposure
If contractor insurance is inadequate, claims may fall back on you. Understand what your own policies would cover and what gaps exist.
Document decisions
If you decide to proceed despite insurance concerns, document the decision, who approved it, and why. This may be relevant if problems later arise.
FAQs: contractor insurance
Can we be held liable for contractor actions?
Potentially, yes. While contractors are generally responsible for their own work, you can be liable if you failed to select competent contractors, gave negligent instructions, or were otherwise complicit in the problem. Adequate contractor insurance ensures claims are covered regardless of where liability ultimately falls.
Should we check insurance for small jobs?
Yes, proportionately. Even small jobs can cause significant damage. A minimum public liability check takes moments and prevents nasty surprises.
What if the contractor works for multiple clients?
Their insurance should cover all their work. Check the policy does not have exclusions that would affect work for you specifically. Aggregate limits (total payouts per year) matter if they have many clients.
Do we need to verify insurance for self-employed contractors?
Yes. Self-employed individuals face the same risks as companies. Public liability is essential. Employers liability is not required if they genuinely have no employees, but professional indemnity may still be needed for professional services.
Making insurance verification routine
Contractor insurance requirements should be part of your standard procurement process, not an afterthought. Build verification into how you engage contractors: request documents before work begins, record what you receive, track expiry dates, and follow up on renewals.
Organisations that do this well treat insurance as one element of contractor due diligence alongside competence, references, and compliance. It becomes routine rather than an administrative burden.
Ready to streamline contractor compliance? Join the Founding Partner waitlist to see how Compliance Cover tracks contractor documentation, insurance expiry, and renewal reminders.