Personal finance

Professional Indemnity Insurance - What is it and do I need it?

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    Freelancers, contractors and small business owners are only human. 99% of the time you're probably on the ball - meeting your clients’ needs and never messing up. But when something does go wrong, and the finger ends up being pointed at you - this is where Professional indemnity insurance can save the day.

    What is Professional Indemnity Insurance?

    Professional Indemnity insurance (sometimes referred to as PI insurance) offers protection for your business against a customer suing you for a financial loss that they believe was caused through your negligent advice and/or services.

    While in reality most claims are settled before they get to court, the legal costs involved can build up very rapidly - even in quite minor disputes. Your professional indemnity insurance provider will defend claims on your behalf, covering your legal fees and meeting any damages you have to pay if you are found liable.

    Here are a couple of recent claim examples when freelancers, contractors and small businesses were thankful to have had professional indemnity insurance in place:

    • A contractor working on the development of a major new shopping centre provided drawings with incorrect measurements of a new stairwell, resulting in a two week delay to the project. The main contractor had to rectify the work, and filed a claim against the worker for £12,900
    • The policyholder was working on the construction of a new building and provided incorrect setting out plans, resulting in the incorrect positioning of a wall. The claimant rectified the error at a cost of £4,000.

    Do I need professional indemnity insurance?

    Professional indemnity insurance should be considered by any self-employed worker who is providing design, advice or specifications during the course of their role.

    While it isn’t a contractual requirement in every instance, most clients will specify that it’s required in their contracts before working with you.

    How much professional indemnity insurance do I need?

    In the vast majority of cases, holding £1,000,000 of professional indemnity insurance will meet the contractual requirements of your client and be sufficient to cover the potential exposure of the work you are completing. However, it is important to check the terms of your contract and consider the size of a claim that could be made against you if something were to go wrong – especially if you are working highly specialised roles and industries or working on high-value projects.

    Does professional indemnity insurance help with IR35 issues?

    If you work through a personal service company and you're concerned about the impact of IR35 on your business then having the right business insurance in place can help show that you are genuinely self-employed not a disguised employee and therefore should be outside IR35.

    Other small business insurance

    Some other articles you might find useful:

    What is Public Liability Insurance?

    What is Employers’ Liability Insurance?

    Can Crunch help me get covered?

    Yes! If you’re a freelancer, contractor, or small business owner, Crunch can help you find business insurance tailored to you through our partner Kingsbridge, Crunch clients or Crunch Chorus members even get a 10% discount on their premiums.

    Get an instant quote today.

    "Disasterproof your business" webinar

    In this webinar, Andy Robinson (Head of Business Development at Kingsbridge Contractor Insurance) joins us to discuss why you need small business insurance, what types of insurance you should consider, what can happen when you aren’t insured, and some examples of typical insurance claims.

    Insurance from Crunch
    If you’re a freelancer, contractor, or small business owner, Crunch can help you find business insurance tailored to you.

    If you’re a freelancer, contractor, or small business owner, Crunch can help you find business insurance tailored to you. If you have any questions about business insurance, or you think you may not currently have the right cover in place, you can talk to our insurance partner – Kingsbridge. You can contact them by phone or using our online form, all the details are on our small business insurance page.

    Crunch clients, or Crunch Chorus and Crunch Free members can get a 10% discount on quotes from within their Crunch software dashboard.