How much professional indemnity should I take out as a freelancer?

[leonag12]

Hello,

I am starting as a freelance web developer, going to registered as a sole trader. When I start I will be dealing with very small clients, such as one man bands, small companies (under 10 staff) & small charities.

How much professional indemnity should I take out? The smallest amount is £50,000. Should I take this ,& then upgrade to a higher amount of cover when I start taking on bigger clients?

 

[paulears]

It rather depends on the risk doesn't it? Many self-employed people have no indemnity insurance at all. If you do work that could, if it goes wrong, cost a client a lot of money, and the blame is yours, then it makes sense, and the amount needs to be in proportion to the potential risk. Personally, if there is considerable risk, then a Ltd company might give you more protection?

 

[leonag12]

It rather depends on the risk doesn't it? Many self-employed people have no indemnity insurance at all. If you do work that could, if it goes wrong, cost a client a lot of money, and the blame is yours, then it makes sense, and the amount needs to be in proportion to the potential risk. Personally, if there is considerable risk, then a Ltd company might give you more protection?

Thanks Paul! That's what I am trying to understand - the risk. I think it it minimal when dealing with very small clients, so I think I will take out the £50,000. Thank-you & have a good evening.

 

[Simply Business]

Hi @leonag12 - late reply, so apologies!

You're absolutely right, consider how much you feel you'd need to be insured for in the worst case scenario. Unless of course certain contracts stipulate that you be covered to a minimum amount Let me know if you'd like any help/extra info with professional indemnity insurance!

 

[ethical PR]

Government and larger charity contracts often stipulate you need much higher amounts of cover than this 250 - 500,000 aren't unusual.

 

[AllUpHere]

I think mine covers a million for prof indemnity, and 3 million for public liability. These types of insurance cost peanuts so you may as well cover yourself for a decent amount.

 

[ldjames]

I don't see why a freelance web designer needs professional indemnity cover.

 

[john1989]

I don't see why a freelance web designer needs professional indemnity cover.

In the event of a claim against them.

 

[AllUpHere]

I don't see why a freelance web designer needs professional indemnity cover.

Anyone who gives any advice to a client should really have Professional indemnity cover.

 

[ethical PR]

I don't see why a freelance web designer needs professional indemnity cover.

Why do you feel they don't need cover?

As All Up says anyone providing a service will need to have this.

What would happen if a freelance designer messed up and didn't deliver a website in line with an agreed contract resulting in business loss running into tens of thousands - would you expect the freelance web designer to cover this out of his/her pocket?

 

[AllUpHere]

I just looked at my policy, and my million pound cover (for marketing consultancy) costs me £230 per year. It also includes 250K worth of legal cover and loads of other bits and pieces. I think you can pay monthly too, so for 20 quid per month I can't see why anyone would risk doing without.

 

[ldjames]

Professional indemnity cover is very valuable for the vast majority of businesses - including ours. However, a freelance web designer is, as far as I know, extraordinarily unlikely to cause a client to suffer a loss. The types of clients who are serious about dependability tend to use agencies.

I work with freelance designers often and I can't imagine many situations where the work could reasonably be grounds for litigation beyond copyright infringement, which I would guess a policy wouldn't cover you for anyway. In the OP's case I would just have a short contract that says "I aim to deliver in 2 weeks but the client agrees that delays can happen" etc.

 

[Deleted member 59730]

However, a freelance web designer is, as far as I know, extraordinarily unlikely to cause a client to suffer a loss. The types of clients who are serious about dependability tend to use agencies..

I was talking to one of the UK's top media lawyers who told me that numerically most of his cases involved arbitration around text related to photographs. Classic examples are when a designer or photographer miss-spells a place name. £100k is not unusual to pulp and reprint a holiday brochure.

 

[Jamiepa]

It can be hard to estimate how much cover you’ll need for your business. And because each business is unique, there’s no one-size-fits-all solution.

Professional indemnity insurance (or PI insurance), can help to protect you if claims are brought against you by a client. PI will help to put mistakes right and cover any legal costs if a client is unhappy with your work.

It makes sense for anyone who provides a service or gives advice to consider PI. PI might even be a condition of a contract or of membership to a professional organisation, then the level of minimum level of PI will be decided for you.

But if you have to work out cover for yourself, here are three things to consider:

• Size of the contract you are undertaking and the size of the client you’re working for
• Potential costs to defend yourself if it came to the worst
• Maximum compensation that could be awarded against you (think about the fees you are being paid and, perhaps, multiples of this)

When work is going well it can be hard to envisage a scenario where your client is unhappy enough to sue you – for thousands, or even millions, of pounds. Unfortunately, you can’t predict the future and even the happiest of work situations can turn sour if what is delivered does not meet client’s expectations.

As a guideline, think about the value of the contract to you, as well as the complexity of the work involved. Consider the turnover of the business and your pay as a proportion of that turnover.

If you require any more assistance, then please do not hesitate to contact us.