“I’m new to all of this and don’t know where to start!” We hear this all the time from freelancers who aren’t sure what business insurance they need, the different types of cover available and how insurance can help them. We point people to this guide before encouraging them to send over any follow-up questions, but it is a 15 minute read with a lot of info. Let’s distill it down.
What is “business insurance”?
Business insurance is an umbrella term for any policy you buy that’s acting in the interest of your professional services. Here are some popular business insurance products for small businesses and freelancers that you might be familiar with.
- professional indemnity insurance
- employers’ liability insurance
- business contents insurance
- public liability insurance
- legal expenses insurance
- cyber insurance
When we talk about business insurance it can be any one of these policies or a number of them bundled together.
What does business insurance cover?
It’s understandable why you wouldn’t want to sift through a 20+ page policy wording document that’s written by underwriters, but you should dig into each product in detail to truly understand what you’re covered for. Here’s a very high level overview to help you get started.
Professional indemnity insurance. Designed to defend you if you make a mistake in your work or have a difficult client. Usually triggered by a threat of legal action or client trying to recover damages. You can view our professional indemnity product page for more information.
Employers’ liability insurance. A legal requirement in the UK if you have staff on PAYE. Pays compensation to employees if they sustain an injury as a result of working for you. If you’re a freelancer you won’t be legally required to have this. You can view our employers’ liability product page for more information.
Business contents insurance. Replaces or repairs your business equipment that’s lost, stolen or damaged. Also includes data recovery costs. You can view our business contents product page for more information.
Public liability insurance. Designed to defend you if a third-party suffers an accident or sustains an injury as a result of your work activities. Also extends to property damage. You can view our public liability product page for more information.
Legal expenses insurance. This one is tricky to distil into just a few sentences because there are so many elements to it. It can assist with client disputes that haven’t yet escalated to legal action by providing advice and support. You can view our legal expenses product page for more information.
Cyber insurance. Helps you respond to a data breach inline with GDPR. Can also investigate the root cause of the breach. You can view our cyber product page for more information.
That’s a very high level overview of the popular products, but I’d encourage you to dive into each one in more detail. These policies are very meaty and have lots of features. It’s impossible to capture the breadth of their value in just a few sentences.
How do I know what business insurance I need?
Other than employers’ liability if you have staff none of these products are a legal requirement, but it’s a good idea to have some protection in place since freelancing carries a lot of risk.
Whenever customers come to me with an open ended question like “what business insurance do I need?” I love to counter this with the question:
What keeps you awake at night?
Is it making a mistake and the client wanting you to pay for it? You need professional indemnity insurance. Is it not being paid by a client? You need legal expenses insurance. Is it your equipment breaking and losing client data? You need business contents insurance, not only to replace the equipment but to recover the lost data, too.
By asking this question it helps to narrow down what areas of your business you deem to be a risk and worry about. Then we can figure out what insurance products to put in place to mitigate the risk.
However, most people we ask this question to respond with worries along the lines of being ghosted, scope creep, payment issues and unhappy clients.
Let’s run through each product and why you’d need it. Since this is a simple guide we’ll keep this high level but it’s encouraged you do a deep dive on whatever insurance product you’re interested in. You can go into more depth either by reading the policy wording or going into more depth on the product pages I linked to earlier.
As a small business you’ll be expected to deliver work to a deadline and of a certain standard. If any of these things fall short of client expectations, you run the risk of a dispute brewing and that’s when professional indemnity can help. Interested in learning more? Read why does a freelancer need professional indemnity insurance.
Hiring employees? Then you’ll be legally required to carry employers’ liability insurance. There is no skirting around this and you can be heavily fined if you don’t have it.
Do you have the capital to walk out and replace all of your work equipment should it be lost, stolen or damaged? If not you should consider having business contents insurance.
Working on third-party premises or meeting face-to-face with clients? Public liability would pay compensation to a third-party if they sustained an accident as a result of you, or if you caused damage to third-party property.
Most freelancers don’t have a background in legal. Need to know you’re on the right side of a difficult situation? The legal advice helpline provided by the legal expenses product is useful for this kind of thing.
Do you handle important client data or personally identifiable information? If so you should have measures in place to handle third-parties unlawfully obtaining that data. Cyber insurance can assist with this.
The most popular package
What business insurance do you need? It’s a business decision for you to make but don’t worry about getting it right from day one. Most providers allow you to customise your insurance throughout the policy period so if you win a bigger client and decide you need some extra protection, it’s easy to update.
We mostly work with freelancers in the design and tech world. Think web designers, developers, digital marketers and graphic designers. The most popular insurance package they choose comprises of professional indemnity, business contents and public liability insurance.
This is likely because freelance marketplaces like YunoJuno require you to have both professional indemnity and public liability, and it’s a common contractual requirement with clients. Every freelancer depends heavily on their kit so most choose to have some form of protection in place for laptops, phones etc.
The type of services you offer will also impact what business insurance you choose. Most of our customers who are photographers add public liability to their policy since they’re working with members of the public, while designers who work remotely and only engage with clients through screens don’t.
What does business insurance cover?
Professional indemnity insurance will cover your legal fees plus any damages that need to be paid to your client, minus your policy excess. This is as a result of a valid claim being brought against you due to issues like breach of contract, copyright infringement and mistakes in your work.
Employers’ liability will cover your legal fees plus any compensation that need to be paid to employees, minus your policy excess. This is as a result of a valid claim being brought against you for bodily injury.
Business contents insurance will pay to repair or replace your equipment if it’s lost, stolen or damaged, minus your policy excess. It also includes data reconstitution costs if your hard drive or CF card becomes unreadable.
Public liability will cover your legal fees plus any compensation that needs to be paid to a third-party, minus your policy excess. This is as a result of a valid claim being brought against you for bodily injury or property damage.
Legal expenses will cover your legal fees when appointing solicitors to recover unpaid invoices. It will also cover loss of earnings if attending court for jury duty and accountancy fees to defend HMRC investigations into the tax status of your business.
Cyber insurance will cover the cost of computer security experts to investigate a breach, plus the associated services needed to notify affected individuals.
How do I get business insurance?
By now you should have a pretty good idea of what business insurance is and how the different products can help you. Every insurer is different and it depends on what products you want, but the one we work with likes to know:
- your turnover
- the professional services you provide
- company name (if you’re a sole trader this would be your own name or trading name)
- number of employees if buying employers’ liability
- level of cover
- value of equipment if buying business contents
You can get a quote here. In terms of whether you qualify for the policy you’ll be asked a series of risk questions related to your work, but don’t worry if you need to answer false to any of them. It just means some additional information is collected.
