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 are you covered for?
If a client makes a claim against you, your professional indemnity (PI) policy will pay the defence costs. Even if you're in the wrong.
A famous case in the web development world is the lawsuit between Facebook's Mark Zuckerberg and ConnectU's Winklevoss twins. The Winklevoss twins claim Zuckerberg had broken an oral contract between them, 'stealing' their idea and even using some of the code from the ConnectU project for Facebook.
The Winklevoss twins received compensation to settle the lawsuit. This would be covered under a PI policy alongside defence costs.
Intellectual Copyright Infringement
The most common claim against designers is for copyright infringement.
A famous example of this is the Barack Obama 'Hope' poster. The artist used a copyrighted photograph without permission from the photographer.
The designer originally faced prison time, but the agreement was settled on a fine of $25,000 and 300 hours of community service. Professional indemnity would have covered the legal fees, as well as the $25,000 fine itself.
Cover extends to infringement of domain names, trademarks, trade names, logos. This is particularly relevant for graphic 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.
Professional Indemnity will pay you the amount owed to you by your client if the insurer believes this will avoid a claim for a greater amount.
Negligence covers a broad spectrum, but think of this as the bread and butter of your PI policy.
This covers any errors you make. This could be a bug in your code, a pricing typo on the client's website, or providing misguided advice to a client.
Check out 4 true stories of creative businesses that wished they had insurance.
A data breach covers loss of documents or deletion of important data. As a freelancer, clients are trusting you with important information, files, graphics, templates, etc.
It's your responsibility to keep this information safe.
This could extend to cyber liability, where there's been unauthorised disclosure of personally identifiable information or third party corporate information.
In the event you lose documents, delete data or are victim to a data breach, your professional indemnity cover will step in.
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?
PI policies differ between insurers, so it's always worth reading the policy wording. A good PI 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.