Insurance for freelancers is still a relatively new concept, so you may be unsure why you need to be insured. Here are 4 reasons why freelancers should have business insurance.
Sometimes client relationships or projects don't go to plan
This is a big one. Whilst you can control the quality of work you deliver, there are some things outside of your control. Professional indemnity insurance covers a broad range of risks and any freelancer offering advice or providing a service to a client should have it.
Not only can the outcome of a project be unpredictable, but the way clients react is out of your control.
- Freelancers can be accused of making a mistake
- A project being delivered late can result in loss of income for a client
- Designers can be accused of copyright infringement
- Contracts can be accidentally breached
- A client can be dissatisfied with the work you deliver
The list goes on. If any of these scenarios lead to a client pursuing legal action against you or recovering a loss, your professional indemnity insurance would pay your legal expenses in the defence of a claim.
From our experience, most situations arise as a result of a client relationship gone sour. This can be due to project management issues or a client whose expectations are misaligned with the freelancer. Insurance can give you a bit of control over a situation that hasn't gone to plan.
It's a contractual requirement and helps you build trust
A lot of clients and job marketplaces contractually require insurance. Some clients won't hire a freelancer for a project without it, and websites like YunoJuno make it mandatory to use their platform. It's increasingly common for contractors to be asked for proof of insurance.
Depending on the job, some clients require professional indemnity insurance whilst others ask for public liability. You might have a client that demands a ridiculous level of cover, but remember that contracts can be negotiated.
You don't want to miss out on potential work because you're uninsured—especially when a policy can start from as little as £14/month. It's also best to avoid scrambling to get cover sorted at the last minute when a lead comes in because this could lead to you not having suitable cover.
Be prepared to meet contractual demands from day one and show clients you're a trusted professional.
Building trust with clients is a freelancer's priority and business insurance does this by ensuring there's minimal disruption to client work if there's an accident or mistake. If something goes wrong and the client looks to recover a loss from you, your insurance can help you.
There are many risks freelancers face that could cause you to lose money and close up shop altogether. With insurance in place, it shows the client you're in a stable position even if something was to go wrong.
It removes the pain of finding and paying for legal help
How would you handle an unhappy client threatening legal action? Without insurance your options are limited. You can ask others in your industry how they handled it or—depending on the severity—approach a lawyer for legal advice.
The former could make the situation worse if acting on the advice from someone without legal experience. The latter would be expensive and require you to find a suitable lawyer for your situation. Is it a contract dispute? A copyright issue?
Insurance removes the need to trawl the internet looking for the best legal help. The insurer has a global network of legal experts they can call on for help. Depending on the jurisdiction and nature of the problem they'll dip into this network to find a suitable solicitor to represent you.
You won't have to pay expensive, upfront fees for this. The cost of legal fees in the defence of a claim is included in your insurance.
A contract isn't enough
A common statement I hear is, "I don't need business insurance. I have all my clients sign a contract!".
It's great you have a contract, but it's a common myth that a contract alleviates a freelancer of responsibility. A contract isn't enough to protect you.
Contracts are great for laying the foundation of what duties are to be expected of you as a contractor, but insurance steps into action when those duties come into question.
A contract doesn't pay your legal fees or compensation to a client—insurance does. Furthermore, a claim can even be made against you for breach of contract!