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INSURANCE FOR CONTRACTORS WORKING INSIDE OR OUTSIDE IR35
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PROFESSIONAL INDEMNITY
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PUBLIC & EMPLOYERS’ LIABILITY
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IR35 & TAX ENQUIRY RISK
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CONTRACT & CLIENT DEMANDS
Why IR35 Status Matters for Your Insurance
Whether you are working outside IR35 through your own limited company or inside IR35 via an umbrella
or as a temporary PAYE worker, your contracts still carry risk. The key difference is who is legally
responsible and which entity needs to hold insurance – you, your limited company, the agency or the
end client.
Many contractors move between inside and outside IR35 roles. Some end clients still insist on
professional indemnity and public liability regardless of status. Others rely on their own or the
umbrella’s cover. Getting the structure right protects you, satisfies contract conditions and reduces
the risk of gaps if HMRC or a client reviews your arrangements.
Key Insurance Considerations – Inside vs Outside IR35
Understanding how core covers apply in different engagement models.
Outside IR35 (Ltd Company / PSC)
- Your limited company contracts directly (usually via an agency) and carries the professional risk.
- Professional indemnity insurance typically required under contract and strongly recommended in any case.
- Public liability often required where you work on client premises or visit sites.
- Employers’ liability may be required if your company has employees or labour-only contractors.
- Options for tax investigation / IR35 enquiry cover and legal expenses attached to the company.
- Run-off PI cover may be important if you change trading structure or wind the company up.
Inside IR35 (Umbrella / PAYE)
- You are usually engaged as an employee of the umbrella or on agency payroll.
- Some umbrellas include PI, PL and EL – but limits, scope and exclusions vary widely.
- End clients may still expect evidence of PI/PL for certain roles or contract values.
- If you also do outside IR35 work via a limited company, separate cover will still be required for that entity.
- Tax investigation cover may sit with the umbrella or be available to you personally via separate legal expenses policies.
- Clarity is key: you need to know what is (and is not) covered by the umbrella’s policy.
How IR35 Status Affects Your Insurance in Practice
- Contract Requirements – many frameworks still include standard PI/PL clauses even where roles move inside IR35.
- Client Expectations – some clients expect “business as usual” insurance evidence, regardless of status.
- Liability Chain – outside IR35, the client can pursue your limited company; inside IR35 the umbrella/employer may sit in the chain.
- Cover for Past Work – moving inside IR35 doesn’t remove exposure from previous outside IR35 assignments.
- Mix of Roles – many contractors blend permanent, inside and outside IR35 work and need cover that reflects all three.
- HMRC Enquiries – IR35 investigations can occur years after the work, so legal expenses and enquiry cover can be valuable.
- Sector Sensitivities – financial services, government and critical infrastructure often expect higher insurance standards.
Why Arrange IR35-Related Contractor Insurance Through Insure24?
- We place insurance for IT, digital, engineering and professional contractors across the UK.
- Understanding of how off-payroll/IR35 rules interact with insurance requirements.
- Policies that work whether you are currently inside, outside or switching between IR35 positions.
- Ability to combine PI, PL and EL into a single contractor package where appropriate.
- Access to products including tax investigation and legal expenses cover for IR35 enquiries.
- Support interpreting contract clauses around insurance, indemnity and liability caps.
- Quick documentation for agencies and end clients who need evidence before you start.
How to Arrange Insurance When Moving Between Inside & Outside IR35
- 1. Map your set-up – limited company, umbrella, direct PAYE and any other roles.
- 2. Share current and planned contracts, including any mandatory insurance clauses.
- 3. Confirm whether your umbrella or agency already provides any cover and at what limits.
- 4. Identify past outside IR35 work that may still need PI run-off protection.
- 5. Decide whether you want tax investigation and legal expenses cover for IR35 enquiries.
- 6. We obtain quotes tailored to your work pattern and risk profile.
- 7. You receive documentation clearly showing which entity is insured and for what.
Who Is This Inside vs Outside IR35 Insurance Aimed At?
Suitable for a wide range of professional contractors, consultants and small consultancies.
Individual Contractors & PSCs
- IT & Software Contractors
- Project & Programme Managers
- Business & Change Consultants
- Engineering & Technical Contractors
- Interim Managers & Senior Consultants
- Professional Services Contractors (Finance, HR, Risk, etc.)
Small Consulting & Specialist Firms
- Small Consulting Practices Supplying Contractors
- Niche IT & Digital Agencies
- Boutique Engineering & Design Firms
- Cyber & Data Privacy Consultancies
- Specialist Interim & Advisory Firms
- Multi-contractor PSC “micro-agencies”
I’ve switched between outside and inside IR35 contracts for several years. Insure24 helped me understand what my umbrella covered, where my limited company still carried risk, and put a PI and legal expenses package in place that actually matched the way I work.
Mark T., IT ContractorFREQUENTLY ASKED QUESTIONS
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If I’m inside IR35 via an umbrella, do I still need my own PI insurance?
It depends. Some umbrellas provide PI at a basic limit; others do not. If your contract or end
client still requires PI in your company’s name, or you continue to do outside IR35 work, you may
still need your own cover. We can review your situation and advise on gaps.
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Does IR35 status change the type of insurance I need?
The core risks (making a mistake, causing loss, injuring someone on site) remain similar,
but who is legally on the hook can change. Outside IR35, your company is more exposed and
usually needs its own PI/PL. Inside IR35, some of that risk may move to the agency or umbrella,
but not always in full.
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What happens to my PI insurance if I close my limited company?
Claims can arise years after the work was done. Run-off PI cover can continue to protect you
for work completed while the company was trading. We can arrange appropriate run-off periods
based on your contracts and sector.
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Is IR35 investigation cover included in standard contractor insurance?
Not always. Some policies include tax enquiry or IR35 investigation extensions; others don’t.
Standalone legal expenses products may also be an option. We can help you understand what is
available and how it applies to your trading structure.
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Can I pay monthly for my contractor insurance?
Yes – monthly premium finance is usually available (subject to status), which can help align
insurance costs with your contract income and cash flow.