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Professional Indemnity Teardown: What Are You Covered For?

Policy wordings don't always make a lot of sense, so what exactly does professional indemnity insurance cover you for?

08Sep'16

As a freelancer you'll likely fall into one of three categories when it comes to business insurance:

  • Never thought about it before
  • Bought insurance because it was recommended, but have no idea what it actually covers
  • Diligent freelancer who has insured their business, went through the policy wording with a fine tooth comb and knows exactly what they're covered for

We're guessing the majority fall into the first two categories. Your policy wording isn't the most inviting read, so we've taken some of the relevant aspects of cover and translated it into freelance terms.

What does professional indemnity insurance cover you for?

What are you covered for?

Defence Costs

If a client makes a claim against you, your professional indemnity policy will pay the legal fees incurred in defending you.

Most of the claims we see at With Jack are due to project management issues. Projects being delivered late can lead to claims of loss of income. Missed milestones can lead to the client recovering expenses for hiring other freelancers. Not completing work to spec can lead to claims of breach of contract.

If any of these situations lead to a threat of legal action or a client recovering a monetory loss from you, your insurance can help.

One of the most common causes of claims against designers is copyright infringement.

The copyright claims we’ve seen at With Jack have been varied—from being accused of using assets without the correct license to claims of infringing existing work. Your insurance can help you defend accusations of copyright infringement.

Cover extends to infringement of domain names, trademarks, trade names, logos. This is particularly relevant for graphic designers or web designers.

Unpaid Invoices (Mitigation Costs)

Unpaid invoices are the bane of any freelancer's life. If a client is dissatisfied with your work, they may refuse to pay any or all your fees and threaten to bring a claim against you.

The mitigation costs clause means the insurer will pay you the amount owed to you by your client if they believe this will avoid a claim for a greater amount.

Negligence

Negligence covers a broad spectrum, but think of this as the bread and butter of your professional indemnity policy.

This covers any errors you make or mistakes your client perceives you to have made. This could be a bug in your code, a typo on the packaging you designed, or an underperforming ad campaign you've ran for a client.

If your negligence or perceived negligence leads to a loss for your client, they can try to recover this loss from you.

Data Breach

A data breach covers loss of documents or deletion of important data. As a freelancer, clients are trusting you with important information, files, assets, personally identifiable information etc. It's your responsibility to keep this information safe.

Cover also extends to third-party cyber liability where a client suffers a computer security failure or malicious code is transmitted to their computer.

Unintentional Breach of Contract

Breach of contract can take many forms. It could be something as simple as failing to deliver a project on time or not meeting the client's expectations. Any breach of contract may entitle the client to make a claim for damages for the losses it has suffered.

Read The Wording

That wasn't so bad, was it?

Professional indemnity policies differ between insurers so it's always worth reading the policy wording or asking your insurer questions. A good insurance policy may cost a bit more, but you'll be safe in the knowledge that it offers broader cover.

Oh, and if you're a freelancer who falls into category one of never having thought about insurance, you can get a quote with Jack.

We asked ourselves one important question…

What do we want out of an insurance provider?

With Jack is the answer

With Jack