Business insurance really is useful. But with it being an intangible thing you hopefully never have to use, many freelancers go without.
Now that With Jack's a year old, I've seen some nasty situations arise in the past 12 months and strongly believe every freelancer should be insured. I'm on a mission to help freelancers be more prepared for the problems they face, big and small.
What is professional indemnity insurance?
To grasp just how helpful insurance is, we have to understand what it does.
Professional indemnity insurance exists to put you back in the same financial position after a loss as you were in prior to a loss.
What does a loss look like?
A loss can range from hefty legal fees when defending yourself, to damages awarded to a client. Both of these expenses can arise from a mistake you've made in your work or dealing with a problem client.
From our experience, most situations have arisen as a result of a client relationship gone sour. Here are just a few scenarios we've witnessed;
- Scope creep: A client wanting extra work completed for free, then refusing to pay the developer's outstanding invoice and involving solicitors. Read about what happened here.
- A designer terminating their contract early due to an unhealthy relationship with the client. The client claiming damages for loss of income and compensation for hiring another designer.
- The project was delivered late, which lead to an unhappy client refusing to pay some of the freelancer's fees.
In the above situations, the insurer appointed a team of legal experts to help. Depending on the outcome, the insurer also reimbursed the freelancer's unpaid fees or paid compensation to the client. The cost of this was covered under the policy.
The disheartening thing is that—had any of these freelancers not had insurance—they wouldn't have been able to afford to defend themselves and would have to fold their business.
But I work with a contract
Great! Pat yourself on the back. So have the many freelancers we've helped who have found themselves in a sucky situation.
Having a contract is an integral part of freelancing, but it does not stop a client from making a claim against you. It can even be used as a reason to make a claim against you. Say, if the contract is accidentally breached.
So, what does this insurance do exactly?
In a nutshell:
- It can provide you with a team of legal experts
- It can offer support in scary situations
- It can keep you in business should you suffer a financial loss
- It can cover the cost of legal expenses in the defence of a claim
- It can cover the cost of compensation a client seeks
- It exists to put you back in the same financial position after a loss as you were in prior to a loss
How much does it cost and how do I get it?
Okay, now we're getting into the hard sell.
The cost of insurance varies, but you can expect to pay from £14 per month. You can get it by filling out this form. You'll need your trading name, turnover and an email address or phone number.
What happens if I need to use it?
We've written a blog post to help you when dealing with a claim.
The gist is that you'll need to know the date of the incident and potential loss, as well as provide the insurer with any contracts, emails and communication with the parties involved.
The likelihood you're contacting your insurer because something has gone wrong is high. Insurers understand this and know you'll be feeling stressed. It's in their interest to act swiftly, and they'll support you along that journey.
Jack can, too!
Anything else I should know?
The freelancers we've helped never expected to use their insurance. They're diligent freelancers, great at their profession and do good work. Insurance was there as a back-up. Just in case.
Unfortunately, there are many variables that can go wrong when running a business and they're not always in your control. Insurance acts as a safety net. A buffer.
For < £20 per month, professional indemnity insurance should be an integral part of a freelancer's arsenal. It's equally as important as doing your accounts and working with a contract. Get insured today.