What insurance does a CIS contractor need?

If you work in the construction industry as a contractor under the Construction Industry Scheme (CIS), insurance is essential. The nature of construction work means there are real risks to property, equipment, employees, and the public. Having the right insurance protects your business financially and legally if something goes wrong.

While not every type of insurance is legally required, some are mandatory and others are strongly recommended to protect your reputation and income. This article explains the main types of insurance every CIS contractor should consider and why they matter.

Why insurance matters for CIS contractors

Construction is one of the highest-risk industries in the UK. Accidents, damage, and disputes can happen even with the best planning. Without insurance, you could face expensive legal claims or compensation costs that threaten your business.

Having the right insurance helps to:

• Meet legal and contractual requirements.

• Protect you against claims for injury or damage.

• Cover the cost of stolen or damaged tools.

• Safeguard your income if you cannot work.

• Build trust with clients who expect insured professionals.

Most main contractors and local authorities will not hire subcontractors unless they can show proof of valid insurance.

Public liability insurance

Public liability insurance is the most important policy for any CIS contractor. It covers your business if you accidentally cause injury or damage to a third party or their property while working.

For example:

• A client or passerby is injured on-site.

• You accidentally damage a customer’s property while carrying out work.

Public liability insurance pays for legal costs, compensation, and repairs.

Although it is not a legal requirement, most contractors and clients will expect you to have it before starting work. Many firms require at least £1 million in cover, though larger contracts may specify £5 million or more.

Employer’s liability insurance

If you employ anyone, even part-time or temporarily, employer’s liability insurance is a legal requirement under the Employers’ Liability (Compulsory Insurance) Act 1969.

This policy covers you if an employee becomes ill or injured as a result of working for your business. For example, if a worker slips on-site or develops a condition caused by their job, employer’s liability insurance covers compensation and legal costs.

You must have at least £5 million in cover, although most insurers provide £10 million as standard. Failing to hold valid employer’s liability insurance can result in fines of up to £2,500 for each day you are uninsured.

Even if you only hire labourers on a temporary basis, you still need this policy.

Professional indemnity insurance

Professional indemnity insurance protects contractors who provide design, advice, or consultancy as part of their services.

If a client claims that your work, plans, or advice caused them financial loss or delays, this insurance covers the cost of defending yourself and paying any damages.

For example:

• An architect or designer provides incorrect drawings.

• A project manager gives faulty advice that increases costs.

Professional indemnity is essential if you undertake design-and-build projects or provide any professional recommendations beyond manual labour.

Tools and equipment insurance

Your tools and equipment are vital to your business. If they are lost, stolen, or damaged, you could be unable to work until they are replaced.

Tools and equipment insurance covers the cost of repairing or replacing your tools, whether they are kept on-site, in your van, or at home.

When choosing a policy, make sure it covers:

• Theft from locked vehicles or site storage.

• Accidental damage.

• Hired or leased tools if you use them regularly.

Some insurers also offer “tools in transit” cover, which protects your equipment while being transported between jobs.

Contract works insurance

Contract works insurance (also known as “contractors all-risk insurance”) covers damage to ongoing construction work before it is completed.

For example, if a fire, flood, or vandalism damages part of a project before handover, this insurance pays for repair or replacement costs.

It can also cover materials, temporary buildings, and site equipment. Many main contractors and developers require subcontractors to hold this cover for large projects.

Personal accident and income protection insurance

If you are self employed under CIS, you will not receive statutory sick pay if you are injured and unable to work. Personal accident or income protection insurance replaces your lost income if you cannot work due to illness or injury.

It can provide:

• Weekly payments while you recover.

• A lump sum if you suffer a serious injury.

This cover ensures that bills and living costs are still paid, even when you cannot work.

Van and vehicle insurance

If you use a van or vehicle for your construction business, you need commercial vehicle insurance.

Standard personal car insurance will not cover you if the vehicle is used for work purposes, such as transporting tools or materials. Business vehicle insurance protects against:

• Accidents or damage to your van.

• Theft or vandalism.

• Third-party injury or property damage.

You can also include cover for goods in transit to protect tools and materials being carried between sites.

Other useful policies

Depending on the size and nature of your business, you may also consider:

• Product liability insurance covers claims if materials or products you use cause injury or damage.

• Business interruption insurance covers loss of income if your business is forced to stop trading due to fire, theft, or another insured event.

• Plant and machinery insurance covers owned or hired construction machinery.

How to choose the right insurance

When choosing insurance, consider:

• The type of work you carry out.

• Whether you employ anyone.

• The value of your tools and equipment.

• Client or contract requirements.

• The level of risk on-site.

Review your policies annually to ensure your cover remains up to date as your business grows or changes.

How an accountant can help with insurance planning

An accountant experienced in the construction industry can help you:

• Identify which insurances are mandatory for your business.

• Include insurance premiums as allowable expenses in your tax return.

• Budget effectively for insurance costs.

• Maintain compliance with CIS and HMRC regulations.

They can also work with insurance brokers to ensure your business has the right protection without overpaying.

The bottom line

For CIS contractors, having the right insurance is essential for legal compliance, client confidence, and financial protection.

At a minimum, you should hold public liability insurance and employer’s liability insurance if you have staff. Depending on your work, you may also need professional indemnity, contract works, and tool insurance.

The right mix of cover protects you from unexpected costs, safeguards your reputation, and ensures you can focus on completing projects with peace of mind. Regularly reviewing your policies and seeking professional advice keeps your business protected at every stage.