That's probably not enough detail for a useful article - so let's cover the topic of Professional Indemnity Insurance for freelancers.
What is it? Why is it important? What does it cover you for? And where can you find out more information on which policies are right for you and your business?
Please bear in mind, we're not financial advisors - so we can't give you recommendations on what policies you should be choosing or what cover you require as a business - but based upon conversations with our members and partners, here's our guide to what you need to know!
What is Professional Indemnity Insurance?
Professional indemnity insurance should be at the top of every freelancer's priority list.
This type of policy covers you if a client alleges your services caused them financial harm.
Without it, you could be facing stomach-churning legal bills and payouts out of your own pocket.
Professional Indemnity Insurance is there to protect you if a client tries to recover money from you, or threatens legal action claiming that you had:
+ not delivering work to expected standards
+ made a mistake in your work
+ caused them loss of income or damage to reputation
Not only will a good insurance policy pay out to cover any claims or costs against you, it will also provide you with a legal team to defend you, so it's worth thinking about insurance as both protection financially and legally.
Why is it important?
Whilst Professional Indemnity insurance isn’t a legal requirement for either sole traders or limited company directors required - it is hugely valuable for any freelancers who are offering professional services, handling client data, providing advice and guidance, or working with intellectual property (and that's pretty much all freelancers).
Many clients, especially larger ones, may only work with freelancers who have cover in place, and some professional membership organisations and communities require it to work with them too.
But most importantly, PI insurance provides you with peace of mind that should something go wrong, you've got a form of financial and legal protection for you and your business.
Even if you've done nothing wrong, if a client takes action against you, you could run into significant financial debt to cover legal costs.
Many contracts often put excessive burden or liability on the supplier, in the case of something going wrong; ask for unlimited liabilities without evidence of wrong-doing; or even pass liability on to you in the event of their clients making a claim.
Whilst you should always aim to push back on any contract clauses which are too onerous - insurance provides an additional layer of protection should something slip through.
Compensation claims can even be brought against you if you provided a service or offered advice for free.
44% of small businesses in the UK don't have any form of business insurance, based upon data from 2022, and professional indemnity claims are the most common type of business insurance claim.
What would professional indemnity insurance cover?
Professional indemnity policies are generally designed to cover common risks freelancers face when providing services.
This includes claims of negligence, breach of duty, defamation, libel, slander, intellectual property infringement or plagiarism, financial loss from a client's business downtime, erroneous advice and more.
Some policies cover unpaid fees in the situation where a client is making a claim, and not paying you. Some policies even cover costs of protecting your own reputation in the case of a claim, such as PR and crisis management costs.
Most policies will provide you with legal support, to guide you through the process of when a client is making a claim against you.
However, you still have a responsibility to do the work to the best of your ability, and be professional. Insurance policies won't cover you if you intentionally cause damage to your clients reputation, break NDA clauses, or do anything which breaks the law or puts people at risk.
It's also important to know that new claims can be brought against you for up to six years after an alleged negligent act happened, so a "run-off policy" might be required to cover you for the period of time after your work has taken place.
What might professional indemnity insurance cost me?
Policies vary in their cover and to what amount you'd be covered for. Most policies (and clients who demand cover) recommend £1m of cover as a minimum.
Whilst this sounds like lots of money - premiums for this level of cover can start at as little as £9/month. Insurance payments are tax deductible too, as they're a valid business expense.
Where can I find an insurance policy right for me?
It's important to get good advice, and there are many advisors and brokers who provide independent and impartial advice specialising in small businesses and freelancers. There are also many businesses who provide insurance products directly.
Make sure you do your own research to find an organisation who can advise you, and speak to fellow freelancers to get their recommendations or insight into positive experiences they've had.
Based upon conversations in the Leapers community, we've heard great things about:
WithJack - many of our members work with Ashley at WithJack who specialises in freelancers. They offer Professional Indemnity, Public Liability, Contents Insurance and Legal Expenses cover, and have consistently provided great advice to Leapers over the years. https://withjack.co.uk/
PolicyBee - focusing on small businesses and charity organisations, PolicyBee are a specialist insurance broker. https://www.policybee.co.uk/
Superscript - an online provider, offering cover to for small businesses and advised cover for businesses facing complex and emerging risks. https://gosuperscript.com/
Hiscox - a large and well established provider, again with many of our members recommending them regularly. https://www.hiscox.co.uk/
It's always a good idea to get a range of quotes and compare what different products offer you in terms of coverage.
Make sure you're reading the policy documents so you're clear on what cover you're getting, and if you're not sure - ask your broker or share your questions in the community. We're not insurance specialists, but lots of our members have real-world experience of policies.
Getting professional indemnity insurance as a freelancer is a very sensible move, and maybe required by larger clients or when you're a member of a professional organisation. It offers peace of mind and some financial security, should something go wrong, and for a relatively small cost each year, which is tax deductible. Get advice from a broker or speak to a range of providers to get a quote for cover which reflects your business needs.
Additional Useful Resources
WithJack - why does a freelancer need professional indemnity insurance?
Raconteur - Why insurance for freelancers matters
Twine - What is business insurance?