What is Professional Indemnity insurance?
Professional indemnity insurance is a fundamental insurance for businesses that covers the costs and compensation to your client if you’ve made a mistake in your work, now or in the past, that ends up losing them money.
The mistakes you make might not be discovered immediately – in fact the client typically has 7 years to make a claim against your professional indemnity insurance (sometimes longer), if they think that your negligence is to blame.
Mistakes can be anything from being negligent, not providing reasonable care, giving bad advice, creating a design that isn’t fit for purpose; or even accidentally using someone else’s intellectual property, like photos, without proper copyright attribution.
Professional Indemnity insurance also covers your costs of a claim, including all the legal expenses, even if you did nothing wrong. So even if you know that you haven’t made any mistakes, a client can still make that allegation against you.
Without professional indemnity insurance, your time can suddenly be caught up with finding lawyers to help you, bringing them up to speed with what you worked on and arguing your case. The costs will start building up, while at the same time you are now losing out on time to do real paid work, so suffering a double financial penalty. All of these risks are removed with professional indemnity insurance.
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What does Professional Indemnity insurance cover?
- Negligence: in a nutshell, when you make a mistake or don’t use a reasonable duty of care.
- Bad advice: when you told your client it was the right thing, but it turned out to be a disaster.
- Defamation, libel & slander: unknowingly damaging the reputation of any person or organisation, including mental anguish or emotional distress.
- Copyright breach: when someone alleges that your work is too similar to theirs.
- Claims expenses: legal costs to defend you and other costs in setting the matter right.
- Breach of confidentiality: such as accidentally emailing customer confidential data to the wrong person.
Roles that require Professional Indemnity insurance
Roles that typically require Professional Indemnity include
graphic designers,
teachers and tutors. As they carry a higher amount of risk, thus Professional Indemnity is recommended.
Top professions who need PL insurance
Professional Indemnity insurance for Graphic Designers
Professional Indemnity insurance for teachers/tutors
Professional Indemnity Claims Examples
Professional indemnity insurance covers you for making mistakes. From large scale architectural errors, to smaller print run mistakes, and anywhere in the middle, mistakes can be costly to put right and have expensive legal fees to cover.
Professional Indemnity claim – making a mistake
Different professionals will make different mistakes. For instance a set designer’s worst nightmare is beautifully demonstrated in the rockumentary “This Is Spinal Tap”; where a drawing for a set design for Stonehenge is given in inches rather than feet…resulting in a miniature version of what was wanted.
Professional Indemnity claim – forgetting to do something
Sometimes the mistakes can be more forgetful, such as where a graphic designer used a copyright protected image as a placeholder for a flyer, but then forgot to replace it with the real image before sending the flyer to the printers, resulting in a print run being discarded and the cost of the print run being paid for by the insurers.
Professional Indemnity claim – copyright infringement
As in the example above, copyright infringement does not have to be so clear cut as using something that is obviously owned by someone else is used. In October 2017, US rapper Eminem won £315,000 in compensation from the New Zealand National Party after they purchased a song from an Australian-based music production library, called “Eminem Esque”, and used the song in a political broadcast.
The song had been registered with one of New Zealand’s main industry copyright bodies, the Australasian Mechanical Copyright Owners Society (AMCOS), and was licensed and available for purchase. So the NZNP thought they were safe to use it for their advert – they were wrong. The song was judged to be a copy of Eminem’s own Lose Yourself.
Professional indemnity claims can take time to appear
As with the Eminem example above, sometimes the mistakes take time to come about. For instance a software developer may create a program that appears fine when completed, but when left to run for a few months can develop significant bugs that cause the program to be unsuitable for use.
This delay in making a claim is why it is important to continue purchasing Professional Indemnity insurance even after a contract has finished; in case the client discovers your mistake after you have finished working.
Read more here.
When should I turn my Professional Indemnity cover down?
With Dinghy you have the unique ability to turn Professional Indemnity cover down while you’re not working to save money but stay protected.
One of Dinghy’s smartest features is the world-first ability to turn your Professional Indemnity down to ‘lite-mode’ while you are not working to save yourself money when you are off the clock. Perfect for freelancers who take long breaks, yes, but with Dinghy’s ‘to-the-second’ billing every freelancer could actually be using this feature daily.
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Dinghy cover includes Freelancer Assist as standard
- We chase your unpaid invoices over £200.
- We provide legal and tax advice helplines.
- We give IR35 tax investigation expert support.
- We provide a counselling helpline 24/7
Read more here.
Do I need Professional Indemnity insurance?
Yes! The risk of making a mistake is always there. Even if you think you’ve done nothing wrong, the cost of defending yourself from an allegation can be thousands of pounds, with your time spent arguing rather than working. With Professional Indemnity insurance, you leave all of that to us, so you can get on with the job you love.
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How much does Professional Indemnity insurance cost?
The price of Professional Indemnity insurance varies mostly on what you do and where you do it. For instance, an architect designing large super-structures like bridges in the USA will pay much more than a
web developer in London. Yours could cost less that a cup of coffee a day. Why the difference?
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How does Professional Indemnity insurance work?
If a client is unhappy with your work, or someone alleges you have used their images or music, Professional Indemnity insurers will step in and take control of the conversation. We bring world class lawyers to your side to protect you and review any allegations, so you can focus on your job.
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What level of Professional Indemnity insurance do I need?
Every customer is different. As a rough guide, if you make a mistake, calculate how much it would cost to put it right, then add any compensation for your client, plus your original fee. At Dinghy we do not offer less than £100k Professional Indemnity insurance as we believe that is the bare minimum to cover a claim; with £1m being the go-to for most customers. Best for your insurer to pick up that tab!
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Our Products
At Dinghy we have carefully crafted our insurance products with the freelancer and self-employed lifestyle at their core. In doing so they fit perfectly with your flexible hours and changing work environments. Reflecting the modern way you do business. Stack them together, manage them easily and get yourself covered.
