This article has been written by Nick Green of PolicyBee, an online independent business insurance broker based in Suffolk. They provide dedicated insurance services and products to consultancies, freelancers and contractors. The company has over 10 years' experience in the insurance sector and also offers their services to charities and trustees.
Freelancers, contractors, start ups and established businesses have all scratched their heads at some point and asked the same question: what insurance do I need?
The problem is that there’s no one-size-fits-all answer. There aren’t any definitive guides because every business is different and needs different things (which, granted, doesn’t really help much).
Is freelancer insurance the same as SME insurance, for example? It’s unlikely that you’ll want to waste valuable time trawling through websites and forums trying to find out, so here’s a quick heads-up as to what’s what and why you might need it.
Start at the beginning
First of all, you need to consider the risks to your business. This doesn’t necessarily mean undertaking a protracted risk assessment; just focusing on the basics should be enough to get you started.
So when it comes to you and your business, think about: what you do, where you do it, who you do it with and what you use to do it.
It’s possible that, for you, any and all of these things carry a potential risk. You just have to identify what the specific risks to your business are, whether they’re substantial enough to require insurance and, if they are, what insurance covers it.
So let’s go over them one by one.
The risk: what you do
The cover you need: professional indemnity insurance
Your business activity, your occupation, your profession, your expertise. Call it what you will, it’s what your clients pay you for. In short, it’s the specialist advice or service you provide.
Of course, you’re a conscientious professional and you pride yourself on the quality of your work. But what if a client alleges you’ve made a mistake and it’s cost them money? Or that you’ve not done what they paid you to do in the first place?
If you need to defend yourself against aggrieved clients’ allegations of wrongdoing (with or without foundation), professional indemnity insurance pays for your defence and any compensation or rectification costs you’re liable for.
Levels of cover usually range from around £100,000 to £5m, but can be higher depending on your industry sector, your clients’ demands and the exact nature of the work you do.
Professional indemnity insurance is a complicated beast. It’s a good idea to seek the advice of a specialist broker when you buy your policy, just to make sure you’re getting the right cover.
The risk: where you do it
The cover you need: public liability insurance
Do you go out and about to your clients or have visitors to your premises? If you cause an accident and someone’s injured or their property’s damaged as a result, you can be held liable.
Consequently, if you’re sued for damages to third party people or property, you’ll face a big bill for legal costs and compensation. Public liability insurance covers both those things.
Levels of cover start at £1m and go up to £5m. £10m levels of cover aren’t uncommon, particularly as part of a generic contract’s terms. Check this amount with your client if they ask for it.
The risk: who you do it with
The cover you need: employers’ liability insurance
The only legally required business insurance. It applies to the majority of UK companies and concerns the welfare of your employees.
If an employee of yours is injured or becomes ill whilst working for you, and they deem it’s your fault, they can sue you for damages. Employers’ liability insurance pays for your legal defence and any compensation due to your employee as a result.
Because employers’ liability insurance is a legal requirement for any company with employees, it’s a good idea to find out for certain if your business needs it. The Health and Safety Executive have a definitive guide (PDF, 189kb) for employers - it’s an easy read and should tell you everything you need to know.
Minimum level of cover for employers’ liability is £5m but you’ll find that most insurers and brokers only offer £10m.
The risk: what you use to do it
The cover you need: office contents, buildings and property insurance
Do you have an office? With a computer, phone, desk, plants etc in it? Do you take equipment out and about with you (like a laptop, projector, mobile etc)?
We all know what a pain a damaged or stolen laptop can be. Inconvenience is one thing; not being able to run your business is another. If you’ve invested money in business equipment, we’d suggest it makes perfect sense to protect it.
Levels of cover are up to you. Think about how much it would cost to replace everything, worst case scenario, and that’s a pretty good place to start.
Now, this isn’t an exhaustive list of what’s available by any means but it covers the basic, ‘everyday’ risks a business faces.
Insurance is always a difficult purchase and, for many company managers, a toss up between need, want and budget. You can insure pretty much anything these days – where you draw the line is up to you.
At least now you’ll know where to start.