Insurance advice
Freelancer and contractor insurance is designed to protect you against the unforeseen. This guide, produced in partnership with Markel Direct, outlines the different types of insurance available.
Public liability insurance (PL) and Professional indemnity insurance (PI) are business insurance types that cover compensation claims and are vital to self-employed business owners. It is common for people to misunderstand how each of these insurance policies can protect them against risk and against compensation claims from customers.
In short: public liability insurance covers claims made by members of the public for injury or damage to their property by your business, whereas professional indemnity insurance cover claims from clients of alleged professional negligence or mistakes in your work which have cost the client money.
Read on to find out more detail of how each of these two insurance policies help and why it is important for many self-employed professionals to carry both.
Public liability insurance provides cover for claims against your business of injury or property damage by a member of the public. To put this into context, for most businesses that mean their customers, postal and delivery workers, and suppliers, or even passers-by.
The policy will cover the cost of your legal defence, compensation payments, medical costs and, in some cases, loss of income as a result of the claim.
Large organisations carry public liability insurance as good practice because they typically deal with the general public on a daily basis, however, public liability insurance is not a legal requirement.
As a result, many freelancers either might not be aware of the need to carry this type of insurance or given the option they have chosen not to purchase this type of cover, even if doing so potentially leaves them exposed to claims.
Freelancers who meet clients in their own homes, or who meet clients at the client’s premises should consider purchasing PL insurance in case an accident happens. You may think you are careful and conscientious, but accidents typically happen due to something that is out of our control or if we lose concentration for a split second.
Instances of accidental damage being caused to client property by freelancers are not uncommon and without PL insurance they can be costly.
For contractors the decision to purchase PL insurance can easier as many contracts stipulate both PL insurance and PI insurance as mandatory requirements in the contractual terms and conditions.
PL insurance claims can be wide ranging, many common examples can demonstrate how PL insurance can protect small businesses and the self-employed, and include:
Professional indemnity insurance will cover claims against you made by a client for professional negligence or errors made in work you have completed for the client.
Claims can be made due to professional errors, defamation or libel, sub-standard work, or even the perception that you gave your client poor business advice.
PI insurance covers legal costs incurred in defending against a claim, compensation awards to the claimant, and even the additional costs incurred to rectify an issue as well as loss of income as a result of the claim.
PI claims examples include: a graphic designer creating and printing an advertisement for a client containing incorrect contact details, resulting in the client missing out on sales enquiries. Or a recruitment agency accidentally forwarding on confidential client or candidate information. Or a self-employed business consultant imparting advice that causes their client to suffer a financial loss.
Professional indemnity insurance typically covers the following:
Neither PI insurance nor PL insurance are legal requirements, but they are typically required to win contracts.
However, not all self-employed professionals need to carry both policies at the same time. The following list (which are not exhaustive) highlight examples of self-employed professionals who need both polices, and those who may only need to carry public liability insurance.
If you offer professional services, advice, or designs, to your clients, then you will typically be advised to carry professional indemnity insurance as these activities can potentially expose you to claims of negligence.
If you meet customers or suppliers at your workplace or theirs, or of you own physical business premises, then you will be advised to carry public liability insurance. This is because an accident that someone believes you have caused could result in a compensation claim against you.
Some IT professionals are contracted to work on client’s premises with the existing IT team. If the contractor leaves a laptop cable exposed and creates a trip hazard, then they would need PL insurance in the event of an accident.
They often visit client premises, which increases their risk of accidentally damaging a client’s property.
Website design can also suffer from delays due to opinions and other issues such as compliance, legal and regulatory requirements, and IT technicalities. If a website launch is delayed as a result, then it has been known for clients to look to recoup any monies lost from the web designer.
If a designer meets clients on their premises or at the client’s offices, then they would also need PL insurance in-case of an accident.
If you meet customers or suppliers on your premises or theirs, then it is advisable to carry PL insurance. This is because an accident that someone believes you have caused could result in a compensation claim against you.
Examples of self-employed people who might only need to carry PL insurance includes:
Don’t take our word for it, please seek professional advice about which insurance you need to carry, as different industries have different rules and regulations.
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Freelancer and contractor insurance is designed to protect you against the unforeseen. This guide, produced in partnership with Markel Direct, outlines the different types of insurance available.
IPSE have partnered with Markel Direct, a specialist insurer of contractors, freelancers, self-employed professionals and micro-businesses to offer a 10% discount* on contractor insurance to IPSE members.
IPSE provides you with all the advice and guidance required to ease the burden of tax, delivered by knowledgeable and friendly taxation experts at Markel.
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