Generally there are three types of insurance that a director of a Company needs to consider. These are as follows:
Professional Indemnity Insurance (PI)
Professional Insurance may be required if your Company gives professional advice to third parties. This insurance will cover any actions brought against the Company for claims of negligence arising from advice given by your Company. It is common place for professional specialists such as accountants, lawyers and architects to hold such insurance.
The level of cover required will depend on what your client might insist upon, however usual requirements tend to range from £250,000 – £5 million.
Public Liability Insurance
This insurance is also known as Products Liability Insurance or Third Party Liability Insurance. There is no legal obligation to hold such insurance but it is usual to see a requirement for this insurance in the agency/client terms and conditions.
The insurance provides cover against claims from third parties that may sue if they have suffered because of your actions. For instance spilling coffee over a third party’s laptop, software written by you that does not work or an individual trips over cables you have laid as you have not securely cornered off the area.
It is usual to see the majority of agencies/clients requiring £5 million of cover.
Employers Liability Insurance
By law every employer must have Employers Liability Insurance which gives protection against any actions brought by an employee for illness or injury which has occurred as a result of the employment. However this is no longer necessary if you are the only employee and you own at least 50% of the shares.
In many Personal Service Companies the only employee is also the owner and in theory, an individual cannot take legal action against oneself. However companies with more than one employee will still have a legal obligation to implement such cover.
Despite the removal of the legal requirement it is usual for an agency or client to require cover to be in place. In most cases the amount of cover required is £5 million and often the end client will request proof of such a policy being in place before allowing an individual on site.