Guide to Insurance for Freelance Professionals

Professional Indemnity Insurance

Professional indemnity (PI) insurance protects you against your legal liability for losses suffered by your customers as a result of your negligent advice. Professional Indemnity (PI) is legally required in certain professions, such as law, accountancy & financial services. It is common in other areas such as management and computer consultancy, publishing, engineering and design. If you give any advice which could make you liable, or if you are working in a collaborative arrangement, you should have a suitable professional indemnity policy.Your professional indemnity policy should include retroactive cover, so that you are insured for any claims arising in the next 12 months, but also for your work or decisions back to the date you commenced trading. When you complete your proposal form, you will need to disclose any likelihood of a future claim, as the underwriters will want to protect themselves from taking on any current or known claim exposure.Professional Indemnity (PI) Insurance works on a 'claim made' basis, and so when you cease trading, retire or take a permanent job, it is wise to purchase run off cover for at least 12 months after that in case a claim is made against you, after your policy has expired for work done previously.

Employers Liability Insurance

Professional Insurance for Employers LiabilityThe Employers Liability Act 1969 requires all employers, unless they are exempt, to have at least 5 million GBP of employers liability insurance with an approved insurer to protect them against claims from employees for accidents or sickness caused through work. In practice most insurers offer at least 10 mill GBP cover.The law was amended with effect from 28 February 2005 to exempt very small companies that employ only their owner. As a freelance consultant or contractor operating outside IR35, however, you are likely to have a substitution clause in your contracts. Without employers liability insurance, you cannot fulfill this clause without breaking the law, so in practice you ought to have cover.There are no hard and fast rules about who counts as your employee for the purposes of employers liability insurance. People who you many think of as self-employed may be considered as your employees for the purposes of employers liability insurance; what matters is the real relationship with the people who work for you and the degree of control you have over the work they do for you. Even part-time and casual staff may count as your employees.

Public Liability Insurance

Professional Insurance for Public LiabilityPublic liability insurance covers you against accidents to members of the public or damage to property that occurs as a result of your business activities. It also covers any related legal costs.Even if you work from home, you may need public liability cover. If clients visit you there, the policy will cover you if they injure themselves while they are on your premises - it could be something as silly as tripping over a computer cable. If you regularly work off-site, your policy should cover this too.Product Liability Insurance

Professional Insurance for Product LiabilityProduct liability insurance covers you against injury or damage caused by faulty goods. This can be important if you manufacture, repair, install or even retail goods; a small defect could open you up to massive claims. Your policy should guard you against safety claims, manufacturing quality, spoilage and indemnity costs.

Property & Contents Insurance

Professional Insurance for Property & ContentsYou will need to insure your business property, including premises, fixtures and fittings, stock, computers and equipment. If you work from home, you need to check that equipment used for business purposes is still covered by your home contents insurance, or purchase specific business insurance. In response to a growing trend in home working, an increasing number of insurers no offer buildings and contents policies that specifically include cover for business stock and equipment.IR35 & Legal Expenses Insurance

Professional Insurance for IR35 & Legal ExpensesIR35 Insurance pays costs to cover professional fees relating to tax investigations covering;

Income tax self assessment full enquiries
Corporation tax self assessment full and aspect enquiries
Employer compliance disputes in respect of PAYE, P11D and NIC
VAT & IR35 disputes, S660A enquiries.

Business interruption (or consequential loss) insurance compensates you for extra costs incurred and trading profits lost if your business suffers disruption after, say, a fire.
Tax loss insurance reimburses the tax, penalty and interest losses arising from an HMRC ruling against you which results in additional tax to be paid, especially in relation to IR35.
Legal expenses insurance covers legal costs such as solicitors fees and court costs. Many policies offer legal guidance via a telephone helpline.
Key man insurance can make your business less vulnerable to the illness or death of key employees.

It can be more cost-effective to buy employers liability, public liability and business equipment insurance as a single package.
Professional indemnity insurance premiums will depend on the type of business, your turnover and the number of employees. Don't underestimate the level of professional indemnity protection you need.
Read the small print in any policy documents. Question any clauses that you don't understand.
Be scrupulously honest with your insurance company about information relating to your business and any previous claims.