Do freelancers need insurance?
These days, you can get insurance for pretty much anything - from losing all your data in a cyber-attack to being unable to work due to illness. But if you’re a sole trader operating on a tight budget, is it worth shelling out on insurance? And what insurance do you really need as a freelancer?
Do freelancers need insurance?
As a self-employed freelancer, there are three main reasons you might take out insurance:
1. Legal requirements
In the UK, it’s generally up to you whether or not you take out insurance for your freelance business. However, there is one situation where you’re legally required to have insurance: if you have anyone working for you must have employers’ liability (EL) insurance.
Now, if you’re a freelancer, you might think this couldn’t possibly apply to you. However, it’s worth knowing that EL isn’t limited to employees on your payroll – it can include anyone doing work for you that you directly supervise. This means you might need EL if you take on short term volunteers or contract another freelancer to help you deliver a specific piece of work.
The HMRC website has a handy overview of employment status which can help you work out if you’re regarded as an ‘employer’. If you’re still unsure if you need EL insurance, check with a professional insurance broker who can give you advice for your specific situation.
2. Contractual requirements
Some client contracts state that you must have specific insurance for the piece of work you’re delivering - most commonly either professional indemnity or public liability.
You’re most likely to come across this if you work with larger organisations or public sector bodies. However, small businesses do sometimes include a clause on insurance too, so it’s always worth checking the small print.
3. Peace of mind
As a self-employed freelancer, you’re running your own business. This means that you’re responsible for paying the costs if anything goes wrong. Even if you’ve no legal or contractual obligation to take out insurance, knowing that you won’t be facing a huge bill if the worst happens can provide you with peace of mind.
As a rule of thumb, think about whether you’d be able to deal with a particular event without insurance. If the answer is no, it’s probably worth taking out insurance.
What types insurance do I need?
If you’ve decided you want or need to take out insurance, the next step is to work out exactly what insurance is right for you. This will depend on your individual circumstances. However, the main types of insurance freelancers take out include:
Professional indemnity insurance
Professional indemnity insurance provides cover if a client makes a claim against you because they believe you didn’t deliver work to the required standard or made mistakes in your work. Even if their claim is unjustified, it can take time and money to fight the claim.
As a sole trader, you’re personally liable for the costs of defending and/or settling a claim, so this is one of the top types of insurance that freelancers take out.
Public liability insurance
Public liability insurance provides cover if someone injures themselves due to your work or on your premises. This could be anything from someone tripping over a wire at an event you’re involved in through to accidentally spilling coffee on a laptop during a meeting.
As a sole trader, you’re personally liable for the costs of defending and/or settling a claim. If you don’t ever have direct contact with clients or the public in your work, you may not need this insurance. Otherwise, it’s worth considering.
Product liability insurance
Product liability insurance provides cover if someone injures themselves due to a product you’ve made or sold. This can apply to digital products as well as physical ones.
If you don’t have any products, you’re unlikely to need product liability insurance. However, it’s worth considering if you do build or sell products.
Employers liability insurance
Employers Liability insurance provides cover if a worker injures themselves or gets ill while they’re working for you.
As noted above, you’re legally required to have EL insurance if someone works for you – even if only for a short period of time.
Office & contents insurance
Office & contents insurance provides cover for loss or damage to your property or equipment.
If you work from home, this may already be covered through your home insurance policy, so check this first. If you’re not covered through your home insurance policy, office & contents insurance can be worth taking out - particularly if you’d struggle to cover the cost of replacing property or equipment.
Others…
There are numerous other types of insurance out there that might be worth considering, depending on your circumstances - such as cyber insurance and income protection insurance. Where you draw the line is really up to you!
How do I get freelancer insurance?
A number of companies, such as Create Insurance and PolicyBee advertise specialist policies for freelancers. However, most business insurance brokers will be able to advise you on what you need, so don’t feel you need to be limited to these.
If you’re a member of a trade body, it’s also worth checking for offers on insurance, as this is a common perk. For example, at time of writing both IPSE and FSB include insurance as part of their membership packages.
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