Professional indemnity insurance can help protect freelancers from claims brought by clients if they fall ill and miss a deadline.
The world has been plunged into sudden uncertainty as a result of coronavirus, and the likelihood of a recession looms as markets reel, production drops and stock markets turn from bull to bear.
The health crisis aside, there are serious financial issues that coronavirus has exposed. One of the largest is the huge hole in the social safety net for those that are self-employed. With 5.5 million self-employed in the UK, and around half of those being solo self-employed or freelancers, there are grave concerns regarding the ability of these micro and small businesses to survive during a pandemic- led recession. As work dries up, events are cancelled, clients go into lockdown, and investment slows.
There have been measures implemented by the Bank of England and in the latest budget that can help alleviate some of the liquidity problems that come with a lack of work. However, there are other financial risks that freelancers are exposed to if they fall ill and unable to complete the work they are contracted to do.
Professional Indemnity Insurance provides cover in case there is financial loss suffered by a freelancer’s client due to negligence, or accidental mishap. Negligence can mean simply missing a deadline, which can have knock-on cost implications to the end client. If a freelancer falls ill, and is unable to meet a deadline, they may have to pay costs to their client.
Dinghy, a digital insurance provider for freelancers, explains: If a web developer does not deliver a live website to a deadline, it may result in the delay of a major product launch. This could result in major costs associated with marketing efforts, lost revenue, and reputational damage to the client. Even the legal costs of defending a freelancer from false allegations can cost thousands of pounds.
At these unprecedented times, we would hope that clients can be understanding. However, their businesses may also be feeling a financial pinch, and they may be even more pressed than normal to recoup costs. That is where professional indemnity steps in. It covers legal costs to defend a freelancer from negligence claims, including missed deadlines, even if the allegations are false; and ultimately the insurance can pay any settlement required between the parties.
On the flip side, freelancers may also find that their customers delay paying invoices, or simply refuse to pay as per agreed contractual terms. To help freelancers facing this situation, Dinghy also provides its unique Freelancer Assist insurance package with every Professional Indemnity policy. This provides up to £100,000 of legal costs to help chase clients who haven’t paid.
It is important to note that neither Professional Indemnity insurance or Freelancer Assist covers lost income due to sickness. Freelancers may also want to consider purchasing accident and sickness cover (critical illness cover) – this helps when unable to work through serious sickness or injury. This cover provides an alternative income to pay for monthly outgoings until the freelancer can return to work.
These are unprecedented times for most of us. Doing our best to manage our finances and making sure everyone in society remains safe and sheltered from the worst should be paramount in our collective response to this crisis.