Understanding all the various types of insurance and determining whether you need them can be a minefield.
Freelancers are especially vulnerable to cash-flow difficulties, which is why adequate protection against any potentially costly litigation is essential. However, as a freelancer it’s not always clear exactly what insurance cover you need.
Before you commit to an insurance policy – and certainly before you undertake any freelance work at all – it’s strongly advisable to familiarise yourself with all the various types of insurance available to you. So let’s take a look at these in detail.
First of all, if you’re self-employed, personal insurance could be a lifeline in the event of sickness or injury that prevents you from working. A salaried job comes with the luxury of sick pay and life insurance, but when you’re self-employed, responsibility for all these ‘workplace benefits’ fall to you.
In life you never know what’s around the corner. Suppose you were in a traffic accident and unable to work for six months or more. As a freelancer, if you don’t have insurance to cover loss of income during this time, you could face a very challenging period financially as you recover to health.
And this is important not just for you but for any dependants you have too. If the worst was to happen, you’ll need to make sure your family is provided for - and personal insurance cover is the way to do this.
Buildings and contents
Many freelancers make the mistake of assuming that if they work from home, their standard home insurance covers their work equipment too. Unfortunately, this is not usually the case.
As soon as you start to work from home you should contact your insurer to see if your policy can be adapted to include your business equipment. If not, then you may want to take out a separate business contents insurance policy as soon as possible. This will prevent you from losing all your equipment to theft or fire or flood damage and you wouldn’t be able to claim money to replace them.
Likewise, be sure to check the small print of motor insurance if you are using a private car for work. If you load up with business stock for deliveries or carry clients in your car from time to time, you will probably need commercial cover.
Business Equipment Cover
A workman is only as good as his tools – and if you haven’t got any, that could result in a lot of lost business and even lost clients. If access to the right equipment is at the heart of your day-job, the insurance cover for this could be a lifesaver in the event of damage or theft.
Public liability insurance
If you take your work out of the home, then you need to look into public liability insurance. Every day in 2006, the UK insurance industry paid out £3.3m in general liability claims. This includes bodily injury, illness or disease to members of the public and is of particular importance for freelancers that work in open areas.
It’s important to be sensible here; different types of freelancers will need different levels of cover for public liability, and some maybe none at all. For the freelance copywriter working away in seclusion, for example, ill-health caused to members of the public is unlikely to pose a huge concern. However, for the freelance photographer, whose equipment could easily cause an accident, it becomes a little more serious.
Bear in mind, however, that public liability does apply to you even if you largely work from home and have customers coming and going during the day, such as if you bake and sell cakes or tailor clothes. If someone gets injured on your property, they could easily put in a claim against you.
In an increasingly litigious society, cover for this kind of thing is especially important as the cash-flow issues arising from a claim made against you can easily put a huge strain on operations.
It’s worth noting that on some occasions where you’re out working on behalf of a client, you may be covered under their public liability insurance but you should always make 100 per cent sure that this is the case before taking a job without your own public liability cover.
Professional indemnity insurance is a vital consideration for any freelancer whose job is to provide advice or professional services to other businesses or corporations. If you were to offer inaccurate guidance to a client that eventually leads to financial loss, you could be liable.
Take a freelance designer; the design, advice or a specification that you provide in the course of a project is relied upon by your client. If, for example, a rival brand then decided that your client’s packaging is too similar to theirs and hits them with a libel case, your client will be knocking on your door for compensation.
Likewise, if you’re working on a job that requires a few different parties to collaborate at the same time, but this has to be delayed because you’ve pulled out or failed to deliver at the last minute, then you could be liable for the wasted time.
Over to you
Setting yourself up to make your own crust rather than work for someone else can be extremely liberating and exciting. However, it’s difficult to overstate the importance of making sure that you don’t overlook the things that you took for granted in employment. Getting the right package to ensure you’re covered in every eventuality could be the key to a long and successful career working for yourself.
For more help, information or advice about your business’ insurance requirements, don’t hesitate to get in touch to speak with one of Aldermore’s expert advisors.
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