Professional Indemnity - A Freelancers Guide

Thu, 30 Jul 2009 12:17:33 +0100

Its important you get the right insurance for your business. This A-Z guide provides freelancers with a few pointers on what to look out for before buying professional indemnity insurance.

Adjusting Cover:
It's highly probable that you may need to make mid term adjustments to your professional indemnity policy as your business circumstances change. Ask your insurer what if any charges apply to administrate mid term adjustments.

Agency Conditions:
If you are contracting through a recruitment agency check what mandatory professional indemnity conditions apply in order for you to do business with them.

Appointing A Broker:
Make sure your broker is authorised & regulated by The Financial Services Industry (FSA) & is familiar with the freelance industry. You can check if they are licenced or not here www.fsa.gov.uk.

Cancelling Cover:
If you decide to cancel cover mid term, it's worth finding out what if any rebates your insurer will pay.

Excesses:
Find out what excesses apply to your insurance. Generally speaking you should only have to pay the first £500-£1000 of any one claim.

Exclusions:
Check your policy wordings for any 'sneaky' exclusions that could potentially leave you exposed if you need to file a claim.

Group Schemes:
Be wary of group professional indemnity schemes, where cover is shared with other individuals. Normally aggregate limits apply, which cap the maximum amount paid out for all losses in a policy period-potentially leaving you under insured if other individuals have made claims in the same year.

Insurance Premium Tax (IPT):
Make sure any premiums you are quoted include insurance premium tax, a 5% taxation placed on insurance by H.M. Government.

Insurers:
Find out the name of the insurer who is underwriting your policy & make sure they are reputable. You can easily check their credit worthiness through agencies like A.M Best & Standard & Poor's.

Limit of indemnity:
Most clients or agencies insist on mandatory limits of insurance in their terms of business with you. If not, probably the best advice is to buy the highest level of cover you can reasonably afford. If you were advised to take out a low level of cover, and were involved in a court case where the legal fees exceeded your level of cover, you wouldn't be very pleased.

Policy wordings:
Read the policy wordings carefully, take note of any exclusions & make sure your key activities are covered.

Premiums:
Professional indemnity premiums are normally dependent on annual fee income & limit of indemnity required. Prices generally start at circa £160 - £200 for lower levels of cover to £300-£400 for higher levels.

Retroactive cover:
If you already have professional indemnity insurance & are changing to a new insurer make sure you check the new indemnity policy has 'backdated' or 'retroactive' cover to protect you from work carried out in the past.

Run off cover:
Run off cover is worth considering if you are planning to retire or close your business. As claims are frequently made months/years after services are delivered, it will cover you against claims when you are no longer providing professional services but still need protection.

Sub-contractor coverage:
You may engage sub-contractors through your company to assist on larger projects. If you do, find out if your policy covers the liabilities of sub-contractors who work on your behalf.

Resources And Partners : Professional Indemnity Insurance Company, PI Insurance Company, Freelance Professional Indemnity Insurance Company, Recruitment Agency Insurance Company

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Professional Indemnity - A Freelancers Guide