I was doing my daily activity of lurking on a forum for freelancers when I stumbled upon a thread about insurance.
I knew what to expect before I even read it. Somebody asking whether they should get insurance, and a number of replies with silly reasons why they shouldn't.
One of the most dangerous responses is when someone says "No, you don't need insurance. I freelanced for years without insurance and I never had any issues". It's similar to a new driver asking, "Should I always wear my seatbelt?" and an experienced driver replying, "Nah. I've been driving for years and have never had an accident".
I've used this seatbelt analogy before and there's a reason why I keep returning to it.
Whilst a seatbelt won't prevent an accident from happening, it reduces damage to you from the impact. This is just like business insurance. Being insured won't prevent problems from arising, but it can reduce the damage done to your business from a financial and reputational perspective.
Insurance isn't a legal obligation, but it is really smart to have it if you're working with clients. Why? Because of everyday risks like client expectations not being met, relationships breaking down and project management issues getting out of hand.
These are real stories from freelancers and they occur all too often.
Why Freelancers Buy Business Insurance
We asked our customers why insuring their business was important. Here are some of their responses:
- I wanted to make sure I was in the best possible position should there ever be a dispute
- So I have back-up if an emergency arises
- Protection against legal action
- It reassures my clients
- Peace of mind
- I wanted to start my business properly with no worries of potential problems
These are all great reasons. As someone who regularly helps freelancers through sticky situations and used to freelance, my reason for insuring your freelance business would be this:
You can do everything right from day one, but you have little control over client expectations and no control over how they react to the work you deliver. Sometimes things happen outside of your control. Deadlines can be missed, clients can be unhappy, and some projects are downright messy. Being insured gives you the best chance to resolve situations in your best interest.
Stop Giving Terrible Advice
Unfortunately, the advice about not needing insurance isn't uncommon. When freelancers ask about insurance, people typically respond with three things.
- "I've never had insurance. I don't think you need it."
- "I work with a contract and this keeps me protected."
- "I only have it because it was contractually required. I went with the cheapest provider I could find."
"I've never had insurance. I don't think you need it"
It's great you haven't found yourself in a problematic situation with a client, but this doesn't mean you won't in the future. This is bad advice and it's dangerous to tell others they don't need to be insured because your freelance career has been harmonious to date.
Going back to the car analogy, I had been driving for 16 years before I ever had a bump. Another driver used the wrong lane at a roundabout and crashed into my car. I had no control over this driver's actions, but I had control over my own actions such as buying a good insurance policy and wearing my seatbelt. Insurance minimised the disruption to my life by arranging a courtesy car, and my seatbelt prevented me from being seriously injured.
“I haven’t experienced that in the past so it won't happen in the future” is flawed logic. If you're running a business with paying clients, getting insured needs to be as commonplace as doing your accounts, working with contracts and all of the other stuff that lets you do your work with as few disruption as possible.
"I work with a contract and this keeps me protected"
Contracts do not stop a client from making a claim against you. They're useful for laying the foundation of what duties are expected, but insurance steps into action when those duties come into question.
Most of the situations we've helped freelancers with have involved a contract, so it isn't a guaranteed fail-safe process. Contracts are great for providing structure to a project, but this isn't always the case and—in some instances—you can breach your contractual obligation and leave yourself vulnerable to accusations of breach of contract.
You should definitely be working with a contract, but don't fall into the trap of thinking they fix everything and keep you protected.
"I only have it because it was contractually required"
A lot of clients request freelancers have professional indemnity insurance. This means you end up getting insured just to tick a box so you can work with a particular client. This is fine, but it's important you understand what you're covered for just in case you ever have to use your insurance.
Professional indemnity insurance covers a multitude of scenarios, but I like to think of it as insurance for careless mistakes and problem clients.
Here are some resources you can browse to learn more about how your insurance can work for you:
- Professional indemnity teardown pulls the most relevant parts of the policy and how they work
- 'Why do I need insurance?' guide walks you through every step of your insurance
- Mitigation costs clause is one of the most used features of the professional indemnity policy
- The landing page for our professional indemnity policy covers pricing, real stories and features
At With Jack we're trying to move away from the 'tick a box' mindset and prove insurance is valuable. We do that by sharing real stories and being there when our customers need us.
If thinking about whether you need insurance, it's quite simple. Most freelancers will run into a problem client at some point in their career. Insurance exists to keep you in business when that happens. If that sounds helpful, get insured.