Business insurance is an important part of a freelancer’s toolbox, yet many don’t recognise the role insurance can play in their workflow.
Do I need insurance as a freelancer?
Absolutely. Whilst being insured isn’t a legal requirement, freelancing is hard so it’s never a bad idea to offload some of the risk. You can face issues with unpaid invoices, a relationship turning sour or a client claiming they’re unhappy with your work. Sometimes it’s all three.
It doesn’t matter how good you are at what you do—these things happen. All it takes is one difficult client for your insurance to be worth its weight in gold.
What is professional indemnity insurance and how can it help you?
Think ofprofessional indemnity as insurance for careless mistakes or problem clients. Professional indemnity is triggered if a client tries to recover compensation from you or makes a threat of legal action.
We go into more detail in ourprofessional indemnity teardown, or you can read our mammoth ‘Why do I need insurance?’ guide to really bolster your knowledge.
When a client claims loss of income or tries to recover damages due to advice or services that the freelancer provides, your insurance can be triggered. What kind of claims are we talking about? Think expenses incurred for hiring other freelancers to get a delayed project back on track, compensation to fix a costly mistake or damages for loss of income due to the finished product not working as expected.
Insurance is designed to defend you if a client tries to recover money or threatens legal action due to you:
- making a mistake in your work
- causing the client to lose income
- failing to complete work on time
- not meeting client expectations
What happens if a client accuses you of any of the above? If accepted as a valid circ*mstance under your policy coverage, your professional indemnity policy can provide a team of legal experts to defend you, plus pay any agreed compensation to the client minus your policy excess.
The insurer will do everything they can to settle the issue out of court and negotiate the best outcome for you.
Most of the time clients make baseless threats that they never intend to act on, but being insured can put the situation to bed quickly. Instead of suffering alone, paying for expensive legal fees or giving into unreasonable requests to make the situation go away, your insurer can help you navigate the situation.
Freelancers might be thought of as small and unable to fight back with no in-house legal team. Bad clients might think they can take advantage of this, but with professional indemnity insurance you have a team of legal experts helping you stand up to difficult situations.
This ensures the consequences to your business and livelihood aren’t crippling. Professional indemnity insurance will help you stay in business by supporting you legally and financially.
Related reading
- What is professional indemnity insurance
- Other insurance products
How much does insurance cost?
Thereare more exciting things to spend your money on than an insurance policy, we won’t deny that. We’d rather budget for hardware, but a speedy new laptop is useless when an unhappy client is clogging up your inbox and draining your energy.
Business insurance should be an important part of freelancing along with working with a contract and filing your accounts. Plus, it’s a lot cheaper than you’d expect andit’s tax deductible. The policy we arrange at With Jack starts from as little as £14 per month.
Let’s look at three examples when your professional indemnity policy could come in handy.
Client doesn’t think the freelancer completed work to spec
If a client doesn’t feel you’ve delivered the work to spec, refuses to pay your invoice and threatens to bring a claim against you, the mitigation costs clause could be triggered. This involves the insurer reimbursing you for the unpaid invoice if they think it will avoid a claim of a greater amount.
Project is delivered late causing the launch to be delayed
Delivering a project late can cause your client loss of income and incur other expenses. For example, your client might bring other bodies on board to get the project back on track and try to claim the additional expenses from you. The insurer can pay any compensation owed to your client so that you’re not out of pocket.
Freelancer is accused of copyright infringement
It’s not just clients that can bring a claim against you. Copyright infringement is one of the most common claims we deal with. These disputes range from logos, custom typefaces or accidentally using third-party content in your work without the correct license. The copyright holder often requests thousands of pounds in damages, and the legal costs in the defence of a copyright claim can quickly add up. With insurance both the legal fees in the defence of a claim and damages are covered by the insurer.
The rise of professional indemnity insurance
There’s a reason why professional indemnity insurance is the most popular cover amongst freelancers.
Contractual requirement
It’s increasingly common that clients contractually require a freelancer has insurance. All freelancers have a duty of care to clients and failing in those professional duties can have a negative effect on your client’s business, putting you in a vulnerable position if they expect you to rectify things.
An innocent mistake is all it takes for a freelancer to be held liable for professional negligence, or a client pinning the blame on you for something they perceive is your fault.
Even recruitment firms and freelancing platforms like YunoJuno won’t work with uninsured freelancers.
Emotional support
It’s not just financial support your policy provides. Dealing with an unhappy or threatening client can be scary and you’ll need help navigating those situations. As a freelancer you’re a one-person band, but insurance can ease the emotional burden because you don’t need to go through it alone. Don’t just take our word. Read what Craig, one of our customers, said when he needed help with a challenging situation.
Legal protection
Professional indemnity insurance isn’t required by law, but many freelancers buy it for access to affordable legal help. Instead of paying expensive, upfront fees if someone takes legal action against you, professional indemnity insurance is a more affordable option.
There’s nothing stopping a client from making your life difficult for what they consider to be a breach of your professional duty. Even if a freelancer can successfully defend a claim, the legal costs alone can add up. It might be unlikely but it’s best to be prepared for this.
True stories
Here are some true stories involving freelancers we’ve helped:
- How insurance helped this developer accused of IP theft
- How insurance helped this agency when client expectations weren’t met
- How insurance helped this designer with a strained client relationship
- How insurance helped this developer fight scope creep
Remember, insurance is a risk transfer mechanism. It won’t stop projects from going south, but its purpose is to ensure you don’t suffer the financial loss if that happens. Without insurance, you have to find a lawyer, pay to defend yourself and cover any compensation to your client.
With insurance, you don’t carry the financial consequences of careless mistakes or fallouts with clients—the insurer does.
