A Guide to Professional Indemnity Insurance for Freelancers and the Self-Employed

The workforce has evolved greatly, and while some people prefer stability and certainty in the workplace, others opt for variety and freedom. When the Covid-19 pandemic hit, it forced businesses and individuals worldwide to adapt to a remote workforce, and it comes as no surprise that affordable, flexible and in-demand skilled labour now offers greater value than it did before.

In the UK, Freelancers and the self-employed alone contribute roughly £125 billion to the economy and make up 15.1% of the labour force. If this does not prove how important freelancers are, we sure hope the next point does. While there are numerous perks and benefits enjoyed by permanent workers, freelancers and the self-employed can equally enjoy similar benefits. One such benefit is the professional indemnity insurance.

What is Professional Indemnity Insurance and who needs it?

Professional indemnity insurance is designed to protect you from claims made against your business by a client who believes the quality of your work has compromised their company or caused them a financial loss. Should you be found liable, this fund, also known as professional liability insurance, will typically cover the costs associated with rectifying the mistake(s), settling the claim, and any legal fees you might encounter.

Freelancers and self-employed individuals are not exempt from a claim simply because they work independently. In fact, they might even be more vulnerable because they are so small, and some clients may assume that they wouldn’t be able to fight back. In a nutshell, if you’re offering services to clients, whether you are a big company or a freelancer, it would be in your best interests to ensure that you are insured.

Like any other insurance, professional indemnity will differ from insurer to insurer, and you have to carefully select the one that aligns with your needs. Professional indemnity insurance should typically cover you for:

  • Accidental confidentiality breach.
  • Irresponsible employees – in a case where employees compromise the client’s company.
  • Professional negligence – Failing to deliver due care to a client, e.g., ill advising a client.
  • Defamation– actions that compromise the client’s reputation.
  • Infringement of intellectual property rights – unintentionally violating intellectual property, copyrights, or trademarks.
  • Loss of, or damage to, documents.
  • Legal costs – legal costs associated with a claim laid against you.

Things to know before obtaining policy coverage.

If you currently advise or plan to render professional services to a client, it would be in your best interest to consider taking out professional indemnity insurance. Even the most experienced professionals make mistakes sometimes, and this is normal.

It’s not a legal obligation for you to take out professional indemnity insurance. However, you might find yourself in desperate need of one in future and it would be a real pain to have to take care of your unplanned legal costs.

Depending on your profession and the type of cover you’re looking for, your insurer should be able to tailor a quote to meet your specific needs.

Lastly, when sourcing new client contracts. One of the conditions might be that having professional indemnity insurance is compulsory. You would be killing two birds with one stone in this instance, not only could it protect your business, but it could also assist you in securing new business as well.

To learn more about professional indemnity insurance, visit Direct Line.

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