Professional Indemnity insurance

Business
1

Hi,
Im a freelancer and have no insurance. Its getting to a point now that Im really concerned that Im leaving myself open to risk. I SEO and build ecommerce websites and want to indemnify myself. Ive heard too many scare stories of trumped up charges against freelancers becasue the client either has a grudge or doesnt want to pay. I’ve been looking into Professional Indemnity insurance and there are so many options out there. Is it a case where ‘one size fits all’, or do you guys get Indemnity insurance specifcially aimed at web designers?

Ive also been thinking about liability insurance, although was told that Public Liability insurance is only worth getting if I go out and see people on their premises or if I have offices and clients come and see me. Is that true? I do neither of those things, so I guess I dont need Liability insurance, only Indemnity insurance. Is that right?

BTW: I live and work in the UK.
Thankyou

2

Not sure about UK, but in Australia such insurance costs around AU$1000 per year for sole trader (up to AU$1 Mln coverage). I think it may be useful, who knows what can happen in business.

3

What level of risk do you feel you have? The problem with PI insurance is that in many cases the excess and ongoing fees are more than the amounts anyone would actually sue you for. The other gotcha is that many PI insurances, even ones tailored to web designers, don’t cover the situations you actually feel you need cover for.

For example, not many cover hosting, nor ecommerce. Many of the the ones that do have ludicrous excesses and huge yearly fees - great if you are involved in mission critical web sites where you get paid huge consulting fees, not so great if you got paid £500 to set up the site and £20/year to host it.

Also remember that PI insurance is claims based, i.e. if you don’t have an active insurance policy when the claim is made, even if you were insured while the work was originally performed, you won’t be covered. Hence you need PI cover continually and for several years after you cease to be a web designer.

The questions I would ask are; how likely are you to get sued? And if so, what level of liabilities are we talking about? Do you have a water tight contract? How do you deal with site problems when they occur - are they resolved quickly? Most businessess don’t want to sue, they only do so when they feel they have no other option.

If you need some peace of mind, Hiscox offer very cheap PI cover for UK IT based businesses, but their cover is quite limited, so it’s important that you contact them to ensure you are fully covered for your unique situation.

You could also think about forming a LTD company to limit your personal liability in these matters.

4

As far as I understand it, the client can make up any claim they feel like it. The amount people can sue for can be in 6 figure amounts, so it makes fincancial sense to have insurance.
Ill have a look at Hiscox. Im not big enough/dont have enough time for paperwork to be a LTD company, but I might look into forming an LLP.

5

I’ve been looking at insurance aimed specifically at web designers. Looking closer at the policy wording it doesn’t mention Web Design, so maybe just a normal Public Indemnity Insurance will do? I would like to know what other web designers have to cover themselves.

6

The best place you can try would be Professional Insurance Agents. You can get a range of quotes (including Hiscox), even if you are doing some of the more high-risk activities. In the event you can’t get quoted, they are a proper broker so can still obtain terms.

I used them for my professional indemnity insurance and they were incredibly helpful.

They also do the public liability and employers liability.

7

For professional indemnity insurance, I’d definatley consider trying out Constructaquote.com.

I’ve used them in the past and have always found them competitive.

8

Over and over again we hear that people can ‘sue for anything for millions of dollars’ but this isn’t really relevant. Sure, people can sue for anything but that doesn’t mean that anyone who feels like it can drag you through a massive and expensive legal situation. In fact, scenarios like that are rare and courts routinely throw out spurious court cases.

When considering insurance, you need to insure yourself adequately to prevent losses that:

 1) have a material value that could reasonably be caused by errors, omissions, negligence, or other wrongdoing on your part during the course of the type of business that you do

2) have a material value in up to the value of your current assets, both personally and in your business entity unless they are well separated

This generally means that if you have $1,000 to your name and you are doing designs for brochure-ware sites you have quite a small liability. Someone can sue you for 1 million dollars but it’s hard to imagine how you could cause material damages in that amount. So, a much smaller amount of coverage is warranted.

Then again, if your business is worth 5 million and you are custom coding transaction processing systems that handle lots of money, you are handling private/sensitive information for users, your systems are responsible for decision making involving large amounts of cash, or you are otherwise incurring the risk of substantial material damages, then you need more insurance. You should have at least enough insurance to cover those damages plus to protect your assets.

Like life insurance, business insurance also tends to lose utility as you become more wealthy. For example, if you have 2 million dollars in cash in the bank and you are designing business cards for a living you don’t really need insurance at all as you can cover that liability out of pocket.

Web design, if we are speaking strictly about design, is extremely low-risk. There is also general liability, workers, comp, umbrella, etc. that should be considered if you are hosting clients on site, working on client’s sites, etc.

9

Thanks for the reply Sagewing. I see there are brokers out there who say they ‘specialise’ in insurance for web designers/developers, although when I look through their policy documents it mentions nothing about webdesign, development, hosting etc… Is there such a thing as ‘indemnity insurance specilaly designed for web designers’? Or will a generic professional indemnity policy do? I suppose it would be like me saying I specialise in dentist’s websites, but actually Im just a web designer that designs any industry sector’s website. Does that make sense?

10

The professional indemnity policy I got from Professional Insurance Agents wasn’t a dedicated web designer policy but it was a dedicated IT policy, which covers more than just a basic PI policy.

11

When looking for info about business insurance, I’d suggest checking out a couple different places before deciding on anything. It’s a good rule of thumb to never go with the first thing you find - do some research to make an informed choice. Look over some of the articles on http://www.businessinsurance.org to get a better idea about things maybe. Hope that helps!

12

As a UK citizen, have you looked into forming a limited company? A sole trader carries much more personal risk than an employee working for a limited company.