Do you need Professional Indemnity insurance if you’re self-employed?
Not every self-employed person needs to carry Professional Indemnity insurance. If you are self-employed and own a café or a shop, then it is likely that you will not need it.
Professional Indemnity insurance is widely regarded as an essential type of cover for professionals offering services, advice and/or designs to their clients. If you offer any of these three types of service to your clients, then it is important to consider PI insurance.
Examples of self-employed professionals and why they might need Professional Indemnity insurance includes:
Do you need Professional Indemnity insurance if you have self-employed staff?
If you are a self-employed professional who is working for an end-client, agency or other organisation, then it is highly likely that you will need to have your own Professional Indemnity policy in place, as you might not be covered by the Professional Indemnity insurance of the hiring party.
However, if you employ the services of self-employed professionals such as contractors, then it is likely that you are offering professional services, advice and/or designs to your clients. Therefore, you will need your own Professional Indemnity insurance to ensure your business is protected.
This is the same for freelancers who outsource work to other freelancers when they need assistance covering workload.
What is ‘run off’ cover?
It is important to remember that a professional’s duty to their client does not necessarily end when the professional’s business ceases to exist. Professional Indemnity ‘run off’ cover is a policy that is typically taken out when a business stops trading.
‘Run off’ cover will provide indemnity cover for the cost of defending a claim made against those insured under the policy and will cover the losses incurred should the claim be upheld against those insured.
A reason for needing run off cover is if you decide to retire. If you are looking to close your business and wind down, then the last thing you want is a claim being made against you that could have a negative impact on your retirement fund.
There are many other reasons why a self-employed professional might stop trading, including: foreclosure, sale, merger, acquisition or the company owner may simply want a fresh challenge.
Placing a business into run off often results in a discounted premium in recognition that the company is no longer actively trading. The cost of cover can typically decrease year-on-year as the risk of a claim arising decreases.
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