A lot of freelancers think they aren’t doing anything high risk and that their contract is enough to protect them so they don’t need to be insured. Insurance protects you from threats from unhappy clients as a result of your work. Whether that’s because they consider the quality below par, there’s been a mistake in your work or (most commonly!) the client is difficult to please.
We’re not here to spook, shock or intimidate you into getting insured. We’ve created this guide so you can understand what situations insurance can help with and have included real stories from some of the freelancers we’ve helped through tricky situations.
WHY SHOULD I HAVE INSURANCE?
Insurance protects you from threats from unhappy clients as a result of your work. Whether that’s because they consider the quality below par, there’s been a mistake in your work or (most commonly!) the client is difficult to please.
We know you’re great at what you do, but clients can be unhappy with a number of things that are outside of your control;
All freelancers face these risks. It may not be that you’re working in a high risk sector like the medical industry or working with Fortune 500 clients, but projects can get derailed, clients can be unpredictable and mistakes can happen.
You’re responsible for delivering work to a certain timescale, but sometimes deadlines can be missed.
You’re responsible for delivering work to meet client expectations, but sometimes client expectations are difficult to meet.
You’re responsible for providing work to a certain standard, but sometimes mistakes can be made.
If a client threatened legal action or tried to recover compensation, insurance can help you defend the claim. Your insurer will provide you with legal experts to negotiate with your client, all of which is included in the cost of your premium.
While most freelancers won’t ever need to use the practical element of their insurance (legal assistance), every freelancer will benefit from being insured on an aspirational level because it helps you be a confident freelancer.
If a client ever tries to take advantage of you, you can stand your ground knowing that—if the situation does escalate—you personally wouldn’t suffer the financial consequences or have to endure the confrontation alone. You have insurance to help you.
Professional indemnity is a very meaty cover, but we like to simplify it by thinking of it as insurance for careless mistakes or problem clients.
The policy wording can be daunting, but we’ve pulled the most relevant features and shared how they apply to freelancers.
If a client threatens legal action or tries to recover compensation from you, your professional indemnity policy will pay the legal fees incurred in defending you.
Most claims will be settled out of court with the legal experts the insurer appoints you negotiating on your behalf.
I know this sounds scary, but the legal experts are on your side and want the best outcome for you. Every claim is assessed on a case-by-case basis. The less serious situations will see the legal experts help you draft replies to your client instead of getting directly involved. Depending on the severity, they’ll be involved in a way that ensures your relationship with your client remains as intact as possible.
– Ashley, With Jack Founder
Breach of contract can take many forms. It could be something like 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 the losses it has suffered.
The most common claim against designers is for copyright infringement, but all freelancers are at risk. Cover extends to infringement of domain names, trademarks, trade names, logos and more.
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. The insurer 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 professional indemnity policy. This covers any errors you make or that the client perceives you to have made. This could be a bug in your code, a typo on your client’s packaging or a misrepresentation around what work will be delivered.
Not to be confused with the legal fees your professional indemnity policy covers in the defence of a claim, legal expenses will provide you with assistance before making a claim. It also helps you get paid, gives you access to legal advice 24/7, prevents loss of earnings whilst on jury duty, and helps with tax disputes and investigations.
Late payments will be chased for you. If a client is ghosting you and you’ve exhausted your usual credit control procedures with overdue invoices, an expert lawyer will formally chase your debt.
This service is limited to UK and EU invoices over £200 and excludes debt from software supplied by you or tailored to your requirements.
Problems with a client or questions about a contract? This product includes access to a 24/7 legal advice helpline for general queries arising from any business related matter, including debt recovery and contract disputes with clients, tax enquiries and general legal matters. Limited to business matters within EU law.
Here’s a perfect example of the legal advice helpline assisting With Jack customer, David, in pursuing a late payment through small claims court.
– Ashley, With Jack Founder
Being called for jury duty or having to attend court can result in lost wages for freelancers. This product ensures that you can be paid for some of your lost wages where they can’t be claimed back from the court or tribunal.
Accountancy fees can be costly when it comes to tax investigations and disputes. This product provides expert tax advice and assistance in relation to disputes with HMRC relating to enquiries about tax returns, including VAT, PAYE, IR35 and National Insurance contributions.
With Jack helped me through a stressful situation. They bent over backwards to help me! They were very patient with me and always stayed in contact throughout my claim to make sure everything was dealt with accordingly. They explained everything clearly to me (I’m not really good at this sort of stuff!) and were a delight to work with. It's clear to see how much With Jack cares for their clients. I’m really grateful for their help.
Suzanne Li
Freelance photographer
REAL STORY #1
This client asked the freelancer to pay their company damages as a result of work being overdue.
“I’ve been working with this client for 6 months. The brief they gave me has drastically changed. It quickly turned out to be much more work than I originally quoted for as it was technically more complicated. This means the project is now clocking in at double the hours I quoted.”
Clients changing the scope and direction of the project is the root cause of most of our claims. This is why a project scope is crucial, as well as working with clients to ensure everybody is on the same page at all stages of the project and aware that changes to the scope will affect the deadline and budget.
– Ashley, With Jack Founder
I’ve lost clients due to giving this project more time than expected. Deadlines were missed due to my focus being taken by features that weren’t initially planned, shifting deadlines and deliverables not being provided. This has lead to a breakdown in my relationship with the client.
This evening my client has emailed me asking for work to be submitted, but also demanding damages be paid to their company as a result of missing deadlines. What am I supposed to do in this situation?”
What we’re looking at here is:
The relationship has broken down due to project milestones being missed. Because of this there’s now a claim for the freelancer to pay damages.
Professional indemnity claims usually arise from client relationships gradually breaking down. This is why you should have insurance.
If the client is saying, “We’re 3 months behind where we thought we’d be, we estimate we’ve lost out on £20,000 of income and we want you to pay this amount”, this could trigger your professional indemnity insurance.
The insurer would appoint legal experts to negotiate with your client to reach an agreement. The cost of this, alongside the agreed figure for damages, is covered under the professional indemnity policy.
In this situation it’s advised you:
Panicking is a gut reaction when you receive an irate response from a client, but it’s important not to panic.
When things go wrong in a project, your instinct might be to apologise and offer the client a full or partial refund to make the problem go away.
Gathering information is helpful from both an insurance and project management perspective.
NON-PAYMENT
Always employ your usual credit control procedures. This includes sending reminders, enforcing late payment charges or refusing to deliver work until the invoice is settled. Having these basic clauses in your contract will go a long way in helping you get paid.
The legal expenses product includes late payment reminders you can send to your client. This, alongside the legal advice helpline, can assist you with dealing with non-paying clients.
– Ashley, With Jack Founder
Your professional indemnity insurance might be able to help if your client is unhappy with the work you’ve done. Your client’s dissatisfaction with your work does have to be accompanied with a threat or claim to trigger the mitigation costs clause. For example, “We’re not happy with the work you’ve done. We’re not paying you and if you continue to pursue payment we’ll take things further”.
The mitigation costs clause within professional indemnity insurance means the insurer will pay you the amount owed to you by your client if the insurer believes this will avoid a claim for a greater amount.
If your client is dissatisfied with your professional services, refuses to pay for any or all of your fees and threatens to bring a claim against you, the insurer will pay you the amount owed to you by your client if:
If a client isn’t paying for other reasons, the legal expenses product has a debt recovery service where a solicitor will chase your debt for you. Here’s how it works:
There is the option of small claims court if you don’t have insurance. Small claims court can be time consuming, so it’s worth weighing up if this is the right route to take.
Listen to Chris’ experience of going through small claims court and his takeaways.
– Ashley, With Jack Founder
Payment disputes have become more common recently with a lot of businesses revising their budget and making cuts.
We have noticed an increase in clients asking for refunds, possibly due to the impact of COVID-19 and the current economic climate. Usually it’s something along the lines of “We’re not happy and want our money back. If you don’t give us our money back we’ll take things further”.
It’s a scary threat to receive and many freelancers would respond in a way that benefits the client just to make the situation go away. Nobody wants an unhappy client. Nobody likes confrontation.
Insurance is designed to help you in these situations. Whilst your professional indemnity policy doesn’t cover refunds, a threat of legal action will trigger your policy and the insurer will help you defend the claim.
Sometimes the legal experts will do that directly. Other times they’ll assist you with drafting emails to be sent to the client. The end goal is always the same—to get the best outcome for you considering the circumstances.
If you can show that you’ve adhered to the terms of the contract then a refund is not due, but if you’ve failed to deliver the work your client expects, the insurer may advise on negotiating a settlement and a repayment plan if needed.
This is why it’s important to document everything. Contracts are useful for highlighting what terms have been agreed to and can be key to diffusing problems quickly. The contract should outline the terms around payment and what happens if one of the parties wishes to terminate the project or doesn’t adhere to the terms.
If you’ve provided work to the agreed timescale and adhered to the terms of the contract, it will be difficult for the client to pursue a refund.
A lot of times it’s a straightforward case of reminding the client what they’ve agreed to in black and white and highlighting that you’ve adhered to the terms of the contract therefore no refund is due. It’s vital to be a confident freelancer in situations like this.
Sometimes clients make threats with no intention of acting on them, knowing that with a threat of legal action most freelancers will do what the client asks out of fear.
We’ve seen plenty of situations where the freelancer receives a threat and once the insurer is involved the client backs off and withdraws their claim. If you receive a threat like this it’s important to contact your insurer immediately to ensure the best outcome.
Sometimes customers submit claims for products they don't have. For example, a freelancer might want to use the tax advice helpline but hasn’t added the legal expenses insurance product to their policy.
A lot of freelancers don’t understand what their insurance does and doesn't do (hey, this is why we created this guide!).
All policies have exclusions. You can find out what’s excluded in the policy wording under the ‘what’s not covered’ or the ‘exclusions’ section.
You should speak to your insurer when there’s a complaint or criticism from a client or you’ve made a mistake in your work, but this doesn’t mean there’s a claim. Currently it’s a circumstance that could give rise to a claim.
If you’ve been in business for 5 years but only bought insurance a few months ago, there’s a 4+ year period where you haven’t been covered.
HOW DO I PREVENT PROBLEMS FROM HAPPENING?
A lot of the claims we see follow the same patterns. There are common mistakes that lead to problems usually around poor project management. Some of these problems escalate to unhappy clients which is when insurance becomes useful.
Pattern one is missed milestones and delayed projects. Whether it’s a client dragging their heels with deliverables or providing feedback, changing the scope, or the freelancer dropping the ball with their organisational skills or underestimating the workload.
This is problematic because clients can claim loss of income or demand compensation to hire other freelancers to get the project up to speed.
The second pattern is that client expectations are different to the freelancer’s expectations. Why is this bad? Because if a client feels like they haven’t got the work they expected and budgeted for, it can open up a can of worms such as refusal to pay or threats of legal action.
With so many issues stemming from these areas, let’s look at best practices including how to keep projects running on time and manage client expectations.
You can read more about the pause clause here. The aim of the pause clause is to incentivise clients to provide deliverables on time whether that’s input, content, payment or approvals.
– Ashley, With Jack Founder
Most claims are to do with client relationships breaking down and the situation reaches a point where it may escalate. A lot of freelancers don’t have the confidence to handle these situations in the correct way.
Most of our claims are rarely to do with the freelancer making a mistake in their work. Whilst there is cover under the professional indemnity policy if you do make a mistake and the client tries to recover compensation, that makes up a tiny percentage of situations.
Most of the time the freelancer has done good work and completed (or was making progress with) their work to the best of their ability. Where things go wrong tends to be on the client relationship side.
Again, this isn’t necessarily the freelancer’s fault. Yes, we do see situations where the freelancer hasn’t done themselves any favours in terms of overestimating the workload or working without a contract to give the project structure.
But we see poor project management on the client side just as much, if not more. We’ve seen clients hire freelancers for projects with no deadline yet become threatening because they deem the project to be overdue.
We’ve seen clients dramatically change the scope of work midway through a project and react badly when the freelancer needs more time and money to complete the work.
Or a difficult client relationship can just be down to a problem client who, irrespective of the work you do and how good you are at your job, is always going to be difficult to please.
These situations are the ones that tend to cause problems for freelancers, so let’s look at how to handle them properly.
One of most important aspects of healthy client relationships and a fulfilling freelance career is to learn how to set and stick to boundaries.
You deserve to be treated with respect. You are allowed to have boundaries. You bring value to the project. You shouldn’t have to discount your services, work overtime, or put yourself under significant stress to keep a client happy.
– Ashley, With Jack Founder
That’s the easy part. The testing part is how you react when clients try to take advantage of you. A client’s behaviour might not feel hugely destructive to begin with and can be disguised in a variety of ways.
Common situations are clients asking you to work more hours but without more pay, imposing difficult deadlines on you, expecting you to be at their beck and call and changing their mind regularly.
The way you respond to these situations can be the difference between a smooth project that ends harmoniously and one you regret taking on.
If you don’t set boundaries and instead agree to build extra features for free or overwork to meet impossible deadlines, you’re teaching the client that it’s OK to undervalue you.
If you do that certain clients will continue undervaluing you, pushing you closer to burnout and putting you under pressure. That’s where we see a lot of client relationships start to break down, causing friction that leads to the messy situations that insurance can help with.
Some freelancers struggle with setting and sticking to boundaries because they don’t want to deal with conflict and feel uncomfortable telling a client “No”. Or there’s a fear of losing a client so freelancers are willing to overstretch themselves to accommodate their client, but this is a recipe for disaster.
It’s important to remember your client isn’t a friend. This is a professional arrangement that has to make sense for both of you.
– Ashley, With Jack Founder
Now let’s take a recent situation that we’ve seen crop up quite a lot of. A client isn’t happy with either the work you’ve done or the timescale you’ve completed it to, and instead of working towards a solution they put an abrupt end to the project and refuse to pay your fees.
Being insured should give you the confidence to stand your ground with clients who try to mistreat you or extract more from you than has been agreed.
You should be able to firmly say, “I’ve adhered to the terms of the contract and provided good work to a high standard. I believe my fee should be paid”.
Provide a breakdown of what they asked you to do, what you have done and refer to your contract and statement of work to show you’ve been doing what’s asked of you. You’ve done the work, you deserve to be compensated.
If you stand firm and the client doesn’t back down and threatens to take things further, that’s when your professional indemnity policy is triggered. This means you’ll have help to navigate the situation and might even benefit from the policy’s mitigation costs clause if the client still refuses to pay. However, most of the time when you stand firm the client backs down.
The practical element of insurance is getting affordable legal help should you need it, but it’s really the aspirational element of being insured that most freelancers benefit from and comes into play here.
Insurance should give you the confidence to stand firm with clients who are trying to take advantage of you, knowing that if they do push things a bit further you have the help to get you through it.
The With Jack team helped me stick to my guns, reviewed my emails back to the client and advised me on how to respond. Thanks to their advice, the client backed down, allowed me to keep the money I had already earned and we went our separate ways. Thank you for fighting my corner, you rock!
Sam
With jack Customer
REAL STORY #2
This situation started with a damaged piece of equipment and developed into a client claiming damages. What made this situation unique was that two different insurance products came into play to ensure the best outcome from a bad situation.
This freelance filmmaker’s hard drive was scratched internally after being accidentally damaged. This meant he had difficulty retrieving his client work that was on there.
The footage on the hard drive was a 6-day job with multiple people involved, fees, travel, accommodation and food and drink expenses.
Because the hard drive was damaged, the filmmaker’s contents insurance covered the cost of recovering the data using a data recovery service. This was an expensive process costing over £5,000 with no guarantee that any footage can be recovered.
Unfortunately, the data recovery company couldn’t retrieve any of the files from the damaged hard drive, meaning the filmmaker’s client had no footage from their shoot.
Whilst the damaged equipment was nobody’s fault, from the client’s perspective there was nothing to show for a shoot they had invested a lot of time and money into.
The client said that not having the footage had negatively impacted their business. They had paid for travel, accommodation, fees, and arranged for people to be involved in a shoot who believed they’d be taking footage home.
Because of this, the client felt their reputation had been damaged and their business had been impacted negatively. It was on this ground they sought compensation, triggering the filmmaker’s professional indemnity insurance.
Professional indemnity insurance covers claims made against you for compensation. In this instance they were looking to recover over £3,000. The insurer covered the cost of this, minus the policy excess.
If the filmmaker didn’t have insurance, the compensation along with the recovery service would have cost just under £9,000.
Most freelancers turn to Slack groups, Facebook groups, sub-reddits or friends to ask for advice and gather recommendations.
The severity of the situation is assessed. Is this something that can be resolved with a conversation, small claims court or do you need to consult with a lawyer?
You have to find the appropriate lawyer for the type of problem you’re facing. Is it a copyright issue or a contract dispute? What jurisdiction is the claim being made under?
You collaborate with your lawyer. You present your side of the story, the outcome you’d like to achieve and work with your lawyer as negotiations get underway with your client.
A resolution has been reached.
Contact your insurer. They have a huge network of law firms that specialise in the area you’re experiencing a problem in and the jurisdiction.
Gather the evidence you’ll need for the lawyer your insurer has appointed and paid for.
Present your side of the story, the outcome you’d like to achieve and work with your lawyer as negotiations get underway with your client.
Celebrate. You’ve survived financially and emotionally!
What do we want out of an insurance provider?
With Jack is the answer
