A freelancer needs public liability insurance if they work in public, with third parties’ property, or have visits from third parties at their place of work. If a member of the public is injured or has property damaged as a result of the freelancer’s work, public liability insurance covers the cost of compensation claims and associated legal costs.
For example, a dog walker knocks an expensive painting off their client’s wall while collecting their pet from the property. Public liability insurance would cover the cost to repair or replace the item. In another example, a tiler drops a box of tiles on a client’s foot breaking their toe. Public liability insurance would fund compensation to cover their medical bills and the time they’ve had to take off work.
Public liability insurance is usually sold in £1 million, £2 million and £5 million cover limits, with businesses deliberating how risky their trade is, and how large scale their workload is. If you are a small-scale freelancer who does not interact much with the public, you probably do not need to go for the biggest amount of cover.
Research by insurance experts NimbleFins found that £1 million of freelance public liability insurance costs start from £50 to £80 a year for many common freelance industries, but rates will vary depending on factors like profession.
There is no legal requirement to hold public liability insurance as a freelancer (apart from horse riding businesses, according to the Association of British Insurers). They need to weigh up the risk of something happening versus the cost of the policy.
The other consideration a freelancer needs to review is if public liability insurance is required by a trade association or body they want to be affiliated with. Some organisations require certain insurance policies as part of the terms of membership. Likewise, some clients will only work with a freelancer if they have public liability, or other insurance policies in place.
Members of the public are becoming more aware of insurance products and their own right to claim compensation, and can request certificates before agreeing contracts.
However, not all freelancers need public liability insurance. Those who are home-based and don’t work with their clients’ belongings probably don’t need public liability insurance. Even if they go into their clients’ homes for sit-down meetings, the risks of the freelancer damaging their property is probably negligible and so they may feel they can absorb that risk.
Business insurance for a freelancer does need similar examination to any other company, but there are some extra considerations which can feel like more of a lifeline if things go wrong.
Life as a freelancer may seem liberating, picking your own work hours and having no one to answer to except yourself. But with that autonomy comes responsibility, with no paid leave and no sick pay.
So there is the added worry about what you would do about money if something happened to you or your contents and you were unable to work. Personal accident insurance, critical illness cover, income protection and business interruption cover are three policies that can offer a valuable safety net. You may not feel all are necessary, but some may feel appropriate based on your circumstances.
Personal accident insurance pays a weekly benefit if a freelancer has an accident and is unable to work. Some policies only cover workplace accidents, but others pay out for an injury sustained anywhere.
Income protection is similar, but in addition to accidents can cover if a freelancer can’t work because of illness or losing their job through no fault of their own. It pays out an agreed proportion of one’s monthly salary.
Critical illness cover pays out a lump sum if a policy holder is diagnosed with a serious illness listed on a policy, including cancer, heart attack and stroke. If you have a mortgage you may already have this cover in place. The payout can be in the tens of thousands, to pay off debt, mortgage, or changes to living arrangements.
Business interruption insurance, also known as income protection, is a guaranteed income if a qualifying incident leaves a freelancer unable to work. This is not usually based on the freelancer’s wellbeing, but an issue with their place or work or equipment, such as a fire damaging their office or tools.
There are other insurance policies that are taken out by businesses of any size. As well as public liability insurance, professional indemnity insurance is useful for certain – not all – industries. If a freelancer sells its expertise, advice or trade, they run the risk of being held liable for errors or misjudgement that costs their client money in lost income or to put right.
Professional indemnity insurance (also known as professional liability insurance) pays compensation and legal bills connected to these types of claims. Professions that are wise to look at this policy range from accountants to builders, marketing professionals to designers.
For those unsure, a freelancer should look at professional indemnity insurance if they give expert advice, handle sensitive data, have access to a client’s computer system or private information, could face accusations a brief has not been met, could cost clients money with a mistake or wrong decision, or is a member of an industry body that requires this insurance.
Although less common for freelancers, if you take on a worker you also need to see if they qualify to be covered for employers’ liability insurance. This is a legal requirement for all UK businesses hiring staff, apart from a few exceptions.
There is also tax investigation and legal expenses insurance to cover legal assistance, as well as cyber insurance which is a comprehensive financial protection and access to expert help if issues arise with a freelancer’s computer. This could be though funding business interruption costs, helping tackle cyber extortion and other crime, helping to get up and running after a system outage or lost data, or handling reputation management and legal and compensation claims.
Freelancers who work in an office may wish to look at commercial property insurance for business equipment and stock. If a freelancer works at home they should inform their home contents insurance provider to ask about coverage for work-related contents; but an additional premium may be required.
If you have no public liability insurance you can be legally bound to pay damages and legal fees out of your own pocket. Even if you have done nothing wrong, you still need to fund legal representation to fight a claim.
In 2019/20, £6.6 million was paid out in public liability compensation claims, according to the Government’s Compensation Recovery Unit. There were also 72,000 of claims made in the same year.
Insurance is important for a freelancer as there is less financial protection for an individual running their business this way. Unlike a limited company, a freelancer is responsible for all costs.
Erin Yurday, co-founder and CEO of insurance experts website NimbleFins said: “There has been a boom in freelancers over the last few years, but adequate insurance packages have not caught up. It means freelancers are sleep-walking into a disaster, woefully ill-prepared if bad luck comes their way.
“With no real holistic freelance insurance package on the market, reading the sheer volume of policies can feel overwhelming, and many will no doubt look to cut corners to reduce their costs.
“But I cannot stress enough what a lifeline it could be to just have a few of these policies in place. If the coronavirus pandemic has taught us anything, it’s that the unexpected can happen.”
What is appropriate will differ for every freelancer, but Ms Yurday advises freelancers to look at the insurance needed for a business working in their field, and then work through the list to see if those scenarios could apply to them. Then the freelancer should weigh up the risk of an incident occurring, and whether they could afford to survive if they had to take a financial hit.
