Do I need insurance if I’m self-employed?

If, like me, your work mainly involves sitting in a chair, you might not perceive it as particularly risky. However, it’s likely you’ll need some insurance to protect you against legal action. Anyone involved in giving advice and providing services has the potential to make mistakes – and mistakes can be costly. In this post, I’ll explain how you can protect yourself with Professional Indemnity and Public Liability insurance.

What is professional indemnity insurance?

Professional indemnity insurance protects people and business who provide specialist services. This can include advice, such as legal, design, and accounting; it also applies to more physical activities, including physiotherapy, hairdressing, or tree surgery. These are all occupations where clients could claim the service you provided lost them money or harmed their reputation.

In this event, a professional indemnity policy pays for a specialist solicitor to defend you and also covers other legal fees and any compensation. You’ve probably watched enough telly to know that a court case could consume a lot of time and money, even if you’re exonerated. Having a robust policy in place means you don’t have to worry about a claim taking over your life.

How much does professional indemnity insurance cost?

Naturally, the cost depends on the amount of cover and the riskiness of your business. For instance, if you’re a hairdresser, often the worst you can do is give somebody an unexpected mullet. They might need to wear a hat for a few weeks, but it’s unlikely to threaten your business. However, more specialist hairdressers who do perms and colours have access to potent chemicals and could cause lasting damage if something went wrong.

So, before speaking to an insurer, have a think about the type of work you do. What could go wrong? What situations could significantly impact upon the client’s livelihood? How much would it cost to put it right? Large multinationals are likely to be more litigious and to demand higher compensation. Indeed, bigger clients often ask for proof that you’re indemnified.

Check that any insurer understands your business. A cheap standard policy might mean you’re inadequately covered. And that’s a complete waste of your money. Speak to insurers on the phone and explain what you do. If your job is unusual, they’ll often consult underwriters before offering you a quote. Getting the right cover means peace of mind. Your professional association can probably advise on suitable cover and even perhaps offer a discount.

Since specialising in financial coaching, the cost of my insurance has increased significantly. Although I’m not giving advice, the fact that I’m even discussing money with clients makes it riskier than other forms of coaching. Financial advisors pay even higher premiums, as they’re directing clients to pursue a specific course of action.

I’m taking a break from my business, do I still need professional indemnity insurance?

Probably. The insurance needs to be in place when the work is done and when the claim is made. If the problems only come to light a few years later, you’re still liable. If you no longer have professional indemnity insurance, you’ll have to cover any costs yourself. Essentially, you need to protect past, as well as current, work.

Some insurers allow you to hibernate policies. This means you’re temporarily covered for past, but not future, work. The cost of premiums could be halved. You can switch the policy back on at any time. There’s also run-off cover for those who’ve stopped working altogether but require ongoing protection for past projects. This is required for professionals such as architects, doctors,  and chartered accountants.

What’s the purpose of public liability insurance?

Public liability insurance protects you against third-party claims of physical damage to people or property. You’ll need this cover if you visit clients or if they come to your premises. Again, the cost depends on the type of work you do and the environment in which you operate.

My policy covers me for workshops I run for different clients around the country. Their own insurance usually excludes external trainers, so I’m sometimes asked to provide a copy of my insurance certificate when agreeing the terms of the work. My sessions are fairly sedate – the biggest risks are probably damage caused by an extravagant arm gesture or blinding someone with my laser pointer – so the level of cover is relatively low. If you’re a fight choreographer, there’s a much higher chance of somebody losing an ear.

I’m also covered for clients who visit my office for coaching. I can’t imagine how I’d physically injure them, but you never know. I’m pleased to report an unblemished record so far, with no fatalities. As with professional indemnity insurance, consider what could go wrong and how much that would cost to fix.

Conclusion

Professional indemnity and public liability insurance might feel like yet another business expense. However, having this protection in place means you can focus on what you do best. For a relatively small monthly outgoing, you’ll have a legal team ready and waiting to fight your corner.

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Image © Mopic – stock.adobe.com

Catherine Pope

I'm a financial coach who loves Victorian novels, technology, and big books about pensions.

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