What Insurance Do UK Client Contracts Usually Require?

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Most People Buy Insurance Because a Contract Told Them To

Few sole traders decide one morning to buy professional indemnity out of abstract caution. They buy it because a client’s contract landed in the inbox with an insurance schedule in the boilerplate, usually wanted by Tuesday.

This covers the cover types contracts ask for, what the wording commits you to, what a six-year post-completion clause really means, and where it is reasonable to push back.

Why Contracts Drive the Decision

A corporate client or public body has procurement rules. Their legal team inserts a standard schedule into every supplier contract whether you are designing a logo or erecting scaffolding.

Worth understanding, because it helps you tell a requirement that reflects real risk from one that has been in the template since the last framework review. Both need answering. Only the first is genuinely immovable.

The Four Covers Contracts Ask For

Public Liability

Third-party injury or property damage caused by your activities. Typical contractual minimums:

• Sole traders and micro-businesses: £1 million or £2 million
• Medium suppliers: £5 million
• Public sector and local authority: £5 million to £10 million, sometimes higher
• Construction: set in the contract particulars rather than prescribed by the standard form, with £5 million and £10 million the common insertions

If you work remotely and never visit client premises, a lower limit can be argued. Many clients will not move, because the figure is tied to their own insurance arrangements or a procurement framework.

Professional Indemnity

Errors, omissions and negligent advice causing financial loss. Typical minimums:

• Consultants and IT contractors: £1 million to £2 million per claim
• Architects, engineers and surveyors: £1 million to £5 million depending on project value, with professional body rules setting a floor
• Legal and financial services: regulator or professional body minimums apply and are often higher
• Public sector frameworks: £1 million to £5 million is a frequent benchmark

How this policy type interacts with the contract wording is the most important part of this article, below.

Employers’ Liability

Compulsory once you employ anyone, including part-time and casual staff, with a £5 million minimum and most policies issued at £10 million.

A genuine sole trader working alone is exempt, as are an unincorporated business whose employees are all close family and a company whose only employee holds at least half the shares. If you are exempt, say so in writing and ask the client to note it. Do not simply leave the clause unanswered.

Product Liability

Required where you supply physical goods or anything incorporated into a product. Usually sold alongside public liability as a combined policy.

Reading the Insurance Schedule

The limit, and how it applies. Check whether it is per claim or in the aggregate. A £1 million aggregate is materially less than £1 million per claim once more than one claim arrives. Some contracts specify both.

Whether defence costs sit inside the limit. Two policies at the same headline figure are not the same product if one pays legal costs out of the limit and the other adds them on top. Contracts rarely specify this, and it decides how much cover you actually have.

Evidence. Most contracts want a certificate before you start, some annually, some with notice if cover lapses. Make sure your broker can produce one quickly, because onboarding stalls here.

Being named. Construction, facilities management and public sector contracts sometimes ask to be noted on your policy. Being named for cancellation notice is routine. Being added as a full additional insured with policy rights is a different request, and liability insurers frequently decline it. Ask what the client actually needs, which is usually just notification, and take advice before agreeing anything broader.

In construction, joint names cover for the works themselves is a separate matter from your liability policies, and which party insures the works is set by the insurance option the contract selects.

The Clause That Matters: Six Years After Completion

Professional indemnity is written on a claims-made basis in the UK. The policy must be live when the claim is made, and the work must fall after the policy’s retroactive date.

That is the opposite of public liability, which is occurrence-based: an incident during the policy period stays covered even after you cancel.

So finish a contract, cancel the policy because you have retired or gone in-house, and a claim two years later meets nothing. The former insurer owes you nothing.

Which Is Why the Clause Mandates Run-Off

If a contract requires you to maintain professional indemnity for six years after completion, you cannot let the policy lapse when you stop trading. Run-off cover is the policy that handles claims made after you cease, for work done while active.

The period follows your contractual obligation and the Limitation Act 1980: generally six years for contract claims and twelve where the contract was executed as a deed, which includes many construction appointments.

Two refinements worth knowing before you assume six years is the whole exposure:

• For latent problems, time can run three years from the date the claimant knew or should have known, subject to a fifteen-year long-stop
• For work on dwellings, the Building Safety Act 2022 extended Defective Premises Act limitation dramatically, to fifteen years prospectively and thirty years retrospectively

If you work on housing, the six-year clause in front of you may be the least of the exposure.

The Dissolution Trap

A dissolved company cannot hold a policy. If you intend to close a limited company, run-off has to be arranged before dissolution, or the company kept in existence until the period has run.

Sole traders face the same obligation in their own name, and with no company between the claim and their own assets.

Practical step: when you sign a six-year clause, diary it and put run-off premiums into the plan for whenever you wind down. It is normally bought as a one-off at that point, not as an ongoing cost.

The Thing the Schedule Does Not Say

Two misunderstandings cause more trouble than any limit.

Insurance is not a cap on your liability. The limit of indemnity is what the insurer will pay, not what you can be made to pay. If a claim exceeds the limit, the balance is yours. If the contract also contains a liability cap, that is a separate negotiation and a far more valuable one than arguing about the insurance figure.

Indemnity clauses can take you outside your own cover. A broad indemnity can impose liability wider than the law would, and most liability policies exclude contractual liability assumed beyond what would exist at common law. Agreeing to indemnify a client against everything can leave you contractually liable and uninsured at the same time.

If a contract contains an unusual indemnity, an uncapped liability or an onerous insurance obligation, tell your broker before signing. It may be material to your cover, and some policies require it.

Public Sector and Construction Norms

Public sector. Councils, NHS trusts and central government frameworks set higher levels and rarely negotiate. Frameworks such as Crown Commercial Service agreements and Constructionline set minimums for listing at all, so check the requirements at pre-qualification rather than after winning.

Construction. The JCT standard forms set out the insurance structure in their insurance provisions, with the actual figures and periods entered in the contract particulars at the front of the document. The form does not prescribe an amount; the parties insert one. Professional indemnity for contractor’s design is dealt with there too, with the required period typically six or twelve years depending on whether the contract is executed under hand or as a deed.

Note that the JCT suite was updated in 2024, so clause numbering differs between editions. Read the particulars in the document in front of you rather than relying on a clause reference from an older form.

Collateral warranties and third party rights are worth flagging to your broker as well, since they extend your duties to funders, purchasers and tenants who were never your client.

When to Push Back

• The limit dwarfs the contract value. £5 million of professional indemnity on a £5,000 engagement is worth questioning. Ask what risk is being managed.
• The cover does not match the work. A public liability requirement built for site contractors makes little sense for a remote adviser.
• The naming request goes beyond notification. Routine as a notice provision, substantial as a grant of policy rights.
• The duration exceeds the limitation period. Twelve-year requirements appear in contracts executed under hand, where six is the relevant period.
• The indemnity is uncapped or wider than common law. Push here before pushing on the insurance figure; it matters more.

Push back politely, in writing, with a reason. Procurement teams working from templates will often accept a proportionate alternative.

FAQ

Can I just send a letter confirming I am insured?

No. Most contracts want a certificate showing insurer, policy number, cover type, limit and period. Ask your broker for one addressed to the client.

What if I cannot get cover at the level required?

Say so before signing. Some clients accept a lower limit with an explanation where the value and risk justify it. Others will not, at which point the contract is a commercial decision rather than an insurance one.

I am a sole trader and they want employers’ liability. Do I need it?

Not if you work alone. Confirm the exemption in writing and ask them to record it rather than ignoring the clause.

Per claim or aggregate, does it matter?

Considerably. Per claim means each claim can reach the full sum. Aggregate is the total for the year, and one large claim can exhaust it, leaving you exposed on the next.

Does holding the required insurance limit my liability?

No. Insurance pays up to the limit; liability can exceed it. A liability cap in the contract is what limits liability, and it is the clause worth negotiating.

Insurance Requirements in Client Contracts: The Bottom Line

Read the schedule before signing, not after. Check the cover type, the limit and whether it is per claim or aggregate, whether defence costs erode it, the duration clause, and any request to be named.

For professional indemnity, understand that a six-year post-completion obligation means run-off at some point, that a dissolved company cannot hold a policy, and that for work on dwellings the real exposure can run far longer than six years.

And remember what the schedule does not do. It does not cap your liability, and a broad indemnity elsewhere in the contract can leave you liable for things your policy excludes. If you are going to spend one conversation with a solicitor on a contract, spend it there.

This article is general information about insurance and UK law, not advice, and it does not take account of your circumstances. Contract forms, limitation periods and policy wordings vary and change. Take legal advice on any contract you are asked to sign, and speak to an FCA-authorised broker about the cover it requires, before relying on anything here.