In most cases you aren't legally required to have business insurance, however clients and recruitment agencies will often insist that you have insurance cover before you undertake a contract. You may also wish to consider the following:
Insurance as an IR35 Indicator
Purchasing and holding adequate insurance, and professional indemnity insurance in particular, is a key IR35 indicator. Holding your own professional indemnity insurance shows a clear distinction between you as an independent professional, and an employee who would usually have it supplied by their employer. It also demonstrates a financial commitment to protect your interests. These are clear indications to HMRC that you are operating as a bona fide business.
Types of insurance cover that may be useful for you
The most common insurances held by freelancers are professional indemnity, public liability and employers’ liability. You might also consider occupational personal accident cover, particularly if you have to commute to a client’s office or go out on site.
Other types of insurance you may want to take out include directors’ and officers’ liability to cover your responsibilities as a company director, as well as legal expenses insurance which may be useful if you're defending a commercial dispute such as a tax investigation, or when facing a contractual dispute.
Each of the above types of cover are explained in more detail in this FAQs section.