This question trips up a lot of freelancers when buying insurance.
Sorry to break it to you, but there isn't a straightforward answer when deciding how much cover you need. Insurance is designed to help with unpredictable situations, so it's impossible to say exactly what level of cover to have because we can't predict what bumps in the road lie ahead.
There are, however, factors we can consider to arrive at a sensible figure.
The most common level of cover is £1,000,000.
This is usually the number clients request if they have a contractual requirement for you to carry insurance. It's the most common level of cover our customers select when buying insurance.
Step one: Review your contracts
Take a look through your client contracts and see what level of cover, if any, they're asking you to carry. This can be a helpful starting point and in most cases you'll find they're asking for a minimum of £1,000,000.
If your client is asking for a ridiculously high level of cover that's going to add hundreds of pounds to your premium just remember that contracts can be negotiated.
Step two: Consider your budget
The second factor to consider when choosing your level of cover is your budget. If you have a turnover of less than £250,000 and use With Jack to arrange your insurance you can expect to pay around:
- £14 per month for £1,000,000 of professional indemnity
- £19 per month for £2,000,000 of professional indemnity
- £65 per month for £3,000,000 of professional indemnity
There's a £50+ price difference between the lowest and highest level of cover in the above example. What monthly budget can you set aside for your insurance? For most people £14 per month for £1,000,000 is feasible.
Whilst it's a good idea to use your budget to influence what level of cover you choose, we don't suggest shopping for insurance purely based on price. The cheapest provider doesn't always mean the most suitable option.
Step three: Consider the risks you face
It's a good idea to ask yourself what your responsibility to the client is. What's at stake if you make a mistake or they're unhappy with the work you've delivered?
Are you writing copy for packaging that will have hundreds of thousands of units produced? If there's an error in your copy that's overlooked until production it's an expensive mistake to fix (yes, this has happened to one of our customers).
Are you a developer building an eCommerce site for a client that handles thousands of pounds of payments a day? A technical mistake could prove costly. How much income can your client lose? As the developer responsible for building the website, there's nothing stopping your client from pinning the blame on you and seeking compensation (yes, this has happened to one of our customers).
With that said, most of our claims aren't as a result of mistakes the freelancer has made. They're usually project management related. A client can fail to provide deliverables on time but blame you for the project being delivered late.
It's not for you, the freelancer, to decide what damage has been done and that's the scary thing. Insurance, however, can help you stand up for yourself.
If you're still none the wiser…
We've talked about contractual requirements, budget and what's at stake if something goes wrong but don't let your confusion leave you paralysed to the point you don't get insured at all.
The monthly plan you select when using With Jack to arrange your insurance gives you the flexibility to increase or decrease your level of cover at any point. We don't charge any admin fees and your monthly payments will automatically update meaning the policy is as flexible as you need it to be.
"How much cover do I need?" is a bit like asking how long a piece of string is, but the above factors can help you arrive at a sensible figure.
Lastly, it's worth remembering that professional indemnity insurance doesn't just pay compensation to a client, but covers your legal fees as well. These can all add up.