I've just finished reading a post in the freelance subreddit.
It was written by a web developer who was hired to build an eCommerce store for a small business. New features were requested constantly as were changes to existing features. If this sounds familiar it's because scope creep is a common problem freelance developers face.
This slowed down the completion of the site. The client grew increasingly frustrated with the lack of progress and threatened to sue the developer for loss of business. The client also expected compensation for hiring another developer to help.
Here we have:
- Scope creep leading to project delays
- Frustrated client
- Threat of legal action
- Request for compensation to hire other developers
When can insurance help?
As I read this story and the panic in the developer's words, I couldn't help but think, "This could have been resolved with business insurance". Professional indemnity insurance is designed to solve problems just like this.
Intent to sue, financial loss, compensation and legal fees… this is when your insurer would step in to help you. At this stage your professional indemnity insurance would source and pay for legal experts to respond to the threat of legal action, and to negotiate the request for compensation. If a figure did have to be paid this would be covered by your insurance.
The aim of professional indemnity insurance is to put you back in the same financial position after a loss as you'd enjoyed prior to the loss.
In this story there was a threat to sue and request for compensation to be paid. Unfortunately many freelancers operate their business without insurance. Including the developer in this story.
Without insurance legal fees can be unaffordable. This means you're likelier to find yourself in a position of giving the client whatever they're asking for to make the situation go away. £5,000 in compensation is more palatable than compensation and legal fees.
Being insured not only gives you the confidence to handle these types of problems when they arise, but it gives you financial and legal backing you can afford.
Whether I'm browsing the /freelance, /webdev or /smallbusiness sub-reddit, I see the same horror stories crop up repeatedly. Clients refusing to pay, a trip to small claims court… 99% of the time the problem could have been resolved had the freelancer been insured.
Freelancers: Have a solid contract in place, get insurance and avoid becoming a Reddit horror story.