A guide to professional indemnity insurance for freelancers and the self-employed

There are many types of business insurance. from civil liability to employer liability and cyber insurance. all of them are designed to give you the peace of mind that, should the worst happen, you will be protected.

But it can be tricky to figure out which insurance policies are right for your business. This guide will help you decide if professional liability insurance is for you and, if so, what level of coverage you should consider purchasing.

Reading: What is professional liability insurance for consultants

  • what is professional indemnity insurance?
  • What does professional indemnity insurance protect you from?
  • Which professions should consider professional indemnity insurance?
  • do you legally need professional indemnity insurance?
  • professional civil liability insurance for freelancers and freelancers.
  • How much professional indemnity coverage do you need?
  • protect yourself after your professional indemnity policy expires.
  • what is the difference between professional liability insurance and general liability insurance?
  • what is professional liability insurance?

    Professional Indemnity Insurance protects you if a client files a claim against your business because they believe your work has harmed their business or caused them a financial loss. Also known as professional liability insurance, it will generally cover the costs of correcting the errors if you are found liable, settling the claim, and any legal fees you face.

    For example, if you were an IT consultant and recommended a solution that lost all of your customer’s data for several days. Or if you were an accountant and forgot to send a client’s accounts to hmrc and got fined. below is a more detailed look against what you’re covered for.

    What does professional civil liability insurance protect you from?

    Professional indemnity coverage will vary between insurers. so always check what is included in your policy. And remember, just because a quote is cheap doesn’t mean it’s the best value and protection.

    Here are some of the things professional indemnity insurance should cover:

    • breach of confidentiality. if you accidentally disclose information or data to a third party, without the consent of your client. Such breaches cost the UK millions in damages. Examples include:
      • Stolen laptops containing sensitive information.
      • sending an email with important business decisions to multiple people by mistake.
      • emailing important identification documents to the wrong department.
      • irresponsible employees. If you have an employee, or former employee, who affects your client’s business by lying, stealing, or behaving dishonestly, fraudulently, or maliciously.
      • professional negligence. if you fail in your duty of care, such as giving bad advice, and it costs your client time and money. These could include things like:
        • an accountant failing to inform a client of their tax relief options.
        • a financial advisor recommending an unsuitable mortgage product.
        • a building surveyor who does not detect structural problems in a property.
        • a lawyer who makes mistakes when preparing a will.
        • defamation. if you use or produce written or spoken statements or materials that damage a client’s reputation. people often associate ‘libel cases’ with celebrities. however, in 2017, only 6% of the cases were from celebrities, compared to 32% ten years earlier. This is believed to be due to changes in the 2013 libel law. They raised the threshold from ‘substantial harm’ to ‘serious harm’, requiring the claimant to prove ‘serious financial loss’ to support any claim. And although the number of defamation cases brought against companies has decreased, the risk always remains.
        • infringement of intellectual property rights. if you unintentionally violate intellectual property, copyright or trademarks.
        • loss or damage of documents. if you sent documents that were lost in the mail or stolen in your care.
        • legal costs. if you have a claim against you, it covers your legal costs to defend yourself in court.
        • Which professions should consider professional liability insurance?

          If you offer professional advice or services to a client, it is important that you consider professional liability insurance. no matter how experienced you are, we all make mistakes. accidentally sending sensitive information to the wrong email address. or create outdoor billboards that need to be replaced due to a minor typo.

          Depending on your profession, some insurance companies may not cover you. this could be due to several reasons. For example, following the Grenfell Tower fire, several insurers stopped providing professional indemnity coverage to the construction industry or dramatically increased their premiums.

          Below are just a few of the professions that could benefit from professional liability insurance.

          human resources consultants

          By offering advice on how to deal with employee and company problems, a claim could be made against you. emma bostock, direct line business manager, commented: “professional liability insurance is vitally important to human resource consultants. if a client believes the consultant’s advice has been negligent and has caused financial loss or damage their reputation, or if they have taken advice that they felt someone was unfairly terminated, then they could claim compensation. Professional liability insurance is designed to deal with the cost of this risk.”

          It’s not just human resource consultants who should consider taking out professional liability insurance. potentially all consultants should. from IT consultants and PR consultants, to business and management consultants.

          As a consultant, you can greatly impact and help your clients, which can be very rewarding. but there is often a lot of responsibility and little room for error. If a customer believes that you have not obtained the desired result and have damaged their business, they could file a claim against you.

          counters

          If you’re an accountant, chances are you already have professional liability insurance (PII). A minimum level is required for membership in the Association of Chartered Certified Accountants (Acca), the Institute of Chartered Accountants in England and Wales (ICAEW), and the Chartered Institute of Management Accountants (CIMA).

          However, some accountants are unaware of the risks they face. There have been multiple cases against accountants where they have provided tax advice to clients that HMRC found to be evasive and fraudulent. whose penalties can be in the tens of thousands of pounds. Understandably, if they did this deliberately to minimize a client’s tax bill, their professional indemnity insurance would not cover them. but if it were shown to be a genuine mistake, they would be protected.

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          Another area that sees many claims against accountants is breaches of accounting and payroll confidentiality. such as accidentally sending incorrect payment details to the wrong recipient.

          No matter how rigorously you check things, errors happen. we’re all human. To help keep your business safe, you might consider a PII policy that meets the requirements of the Acca and Icaew, as well as the Institute of Certified Bookkeepers (ICB) and the International Association of Bookkeepers (ICAB).

          supervisors

          to be a member of the royal institute of chartered surveyors (rics), you must have professional liability insurance. The amount of coverage RICS requires you to have depends on your business turnover.

          as a member of rics, you must also purchase “tiebreaker coverage”. the rics states that the reason for this is: “to ensure that companies, members and their customers are not exposed to financial harm in the period after a company ceases to operate…”. You can learn more about “protecting yourself after your professional indemnity policy expires” later in this guide.

          real estate and rental agents

          Building a successful real estate agency can be a challenge. especially since the real estate market fluctuates continuously.

          Your clients rely on your experience and solid industry knowledge to guide them. but providing useful recommendations can also have legal implications. To keep your real estate agency business safe, professional liability insurance could give you the peace of mind you’re looking for.

          If you are a member of one of the following professional leasing and estate agent bodies, it is important that you select a policy that meets your requirements:

          • propertymark – formerly the national association of realtors (naea) and the association of residential leasing agents (arla).
          • Association of Residential Leasing Agents (ARLA).
          • safeagents: Formerly known as the National Approved Tenancy Scheme (NALS).
          • web designers

            If you’re a talented and experienced web designer, most of your projects will finish on time and within budget. creating happy clients, a paid invoice, and potentially an introduction to another client.

            Unfortunately, there are times when this is not the case. And while most things can be resolved amicably, there could be a situation where a client escalates it and files a claim against you. for example, if they believe that their website design has resulted in a financial loss. If something like this ever happened, having a bespoke web designer professional indemnity insurance policy could be very important to your business.

            do you legally need professional indemnity insurance?

            You are not legally required to have professional indemnity insurance. however, aside from the peace of mind it can provide, there are other times when you’ll need it.

            first, to join certain professional associations. these include the institute of chartered accountants in england and wales (icaew), the royal institute of british architects (riba), and many more.

            Secondly, by submitting bids for new customer contracts. one of the conditions could be that you must have professional liability insurance. this is usually the case for local authorities. therefore, it could not only protect your business, but also help you win new business.

            professional civil liability insurance for freelancers and freelancers.

            what freelancers need to know about professional liability insurance

            The self-employed work in many sectors and are vital to the UK economy, currently contributing approximately £125 billion. Research by Micro Biz magazine shows the types of freelance skills most in demand in the UK in 2019, the latest year for which data is available.

            the freelance skills that received the highest search volume in 2019.

            Whether your profession is listed in the table above or not, if you are a freelancer providing professional services to your clients, like many other businesses, you are at risk of being sued for negligence.

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            freelance uk describes professional indemnity insurance as: “one of the most important types of insurance freelancers and freelancers will need”. why is this? Unfortunately, the fact that you are self-employed and have no employees does not exempt you from a claim. you might even be more vulnerable, as customers assume, because you’re so small you won’t be able to defend yourself.

            Another advantage of professional liability insurance for the self-employed is the emotional support you will receive in the event that a claim is filed against you. Understandably, dealing with a threatening or dissatisfied customer is always difficult. but if you are alone, it can feel more daunting. Having expert guidance and support can help take the pressure off you.

            what you need to know about professional liability insurance if you are self-employed

            The number of self-employed people in the UK has increased over the last two decades. according to the national statistics office, it increased from 3.2 million people (12.0% of the labor force) in 2000 to 5 million (15.3% of the labor force) in 2019.

            The number of self-employed people across the UK shows that Greater London has the highest proportion of self-employed workers.

            percentage of self-employed people by city region, 2019.

            There are many benefits of self-employment. more control. greater flexibility. the opportunity to earn money doing something you love. but there are also disadvantages. no guaranteed regular income. and the risk that a client may file a legal claim against you.

            If you’re self-employed, like the self-employed, this guide to professional liability insurance will give you a good idea of ​​what you need to know. Depending on what you do and the type of coverage you’re looking for, your insurer should be able to customize a quote to meet your needs.

            How much professional indemnity coverage do you need?

            Coverage can range from hundreds of thousands to millions of pounds. the amount you need will depend on your profession and factors such as:

            • client/project size. if your clients are quite large, the money involved and potential losses tend to be higher, so your coverage should reflect this.
            • customer coverage requirements. Some clients will insist on a minimum level of coverage to work for them. check this first before purchasing coverage, although you can always increase the amount of coverage later.
            • protect yourself after your professional indemnity policy expires.

              With professional indemnity insurance, you are typically only covered against claims for the life of your policy. even if the incident occurred while your policy was in force, if the claim is made after it has expired, you will not be covered. this is called the “claims basis.” it’s something you should check when you take out your cover.

              So what happens if you retire? change profession? or sell the business? Fortunately, you can continue to protect yourself. the obvious way is to keep renewing your policy. Another solution is to remove the drain cover. this will protect you from any new claims made, after your professional indemnity insurance expires.

              But how long do you need stormwater coverage? The Association of British Insurers (ABI) states: “New claims can be brought against you for up to six years after an alleged negligent act occurs, so your settlement policy should cover you during this period.”

              If you change insurers, a settlement policy will also protect you from new claims that occurred when you were with the old insurer. however, his new insurer may cover claims related to previous incidents, as long as he can show that he had professional indemnity insurance when they occurred.

              what is the difference between professional liability insurance and general liability insurance?

              These two types of insurance are often confused. but it covers you for different things.

              Public liability helps protect you against claims related to injury, illness, or property damage. for example, he accidentally spills his cappuccino on a customer’s laptop. or someone gets hurt after slipping on a wet floor at his business premises.

              Professional indemnity insurance covers you if a client claims your advice, work, ideas or designs caused them to lose money or business. For example, her client suffers a financial loss as a result of her advice.

              You can learn more about professional liability insurance on the hotline here.

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