It’s often difficult as a contractor to juggle projects, clients and personal life, so researching insurances and taking out cover may be just one more thing on an ever-growing to-do list. However, it’s particularly important for freelancers that work in the media and creative industry to make sure they’re covered by a Professional Indemnity policy.
From taking risks with an advertising campaign to applying creative license a little too liberally, creative work is subjective and open to interpretation. This puts you at risk of a claim should a client allege that you didn’t fulfil your part of the contract or meet their expectations.
What is Professional Indemnity insurance?
You can read in-depth about what Professional Indemnity insurance is here. However, as a quick overview, PI cover offers protection to contractor accountants from a range of scenarios, including:
This is when a mistake is made when servicing the client, to an extent that costs the client money, good reputation or custom. For example, if a videographer is hired to film a once in a lifetime event that's been advertised by a braodcaster and they fail to capture it adequately, they could face a PI claim.
Loss of documents or data
While documents or data sounds quite official, it could be something as simple as writing a client's bank details on a post-it in a shared workspace - should someone steal and use those details, you could face a claim.
Unintentional breach of copyright or confidentiality
This is perhaps the biggest risk for creative contractors. Most will be diligent in checking that their idea or execution hasn't been done before, but there're millions of creatives across the world - something could slip through the net. You could even face a ficitious claim; regardless of if you're guilty, if would still be expensive to defend.
Defamation and libel
Because creative professions are highly subjective by nature, comments, opinions or even constructive criticisms can be taken out of context or paraphrased. Such a misunderstanding could turn out to be as costly as a professional mistake.
How can Professional Indemnity protect media and creative contractors?
While it’s advisable that all self-employed workers have some form of PI cover, media and creative freelancers are particularly high-risk simply due to the nature of their work.
You could make a mistake while designing branded flyers, meaning the company may have to shoulder the cost of a reprint or risk losing business should something like the company name or website be misspelt. Perhaps you might get the brand tone of voice wrong while developing a social media presence which causes loss of business down the line, or you could unknowingly sample music for a video without permission. Managing and recovering from a reputational misstep or advertising blunder can be as expensive for a client as an accounting mistake or design flaw, and they would look to pass that cost to you by means of a PI claim.
Additionally, PI is often considered an industry formality regardless of your profession – after all, clients want to make sure that it’s up to the contractor to correct any mistakes they make. This means they’re often reluctant to hire contractors that don’t have the correct Professional Indemnity cover and include the insurance as a specification in their contract.
How do I work out how much PI insurance I need?
Imagine the worst mistake you could make in your job. Perhaps you’re a marketing consultant and advise a client to pay out for certain digital advertising. Your client follows your suggestions but they never even recoup their costs, causing thousands of pounds of loss.
How much would these problems cost you to set right? How much compensation for loss of business would you have to pay? How much would it cost you in legal fees to defend yourself at trial and how much would your losses amount to while you’re out of work, or even losing work due to a damaged reputation? That total will be significantly lower than what you should take out as Professional Indemnity cover.
With PI insurance, a limit of £1 million indemnity is typically required at the very least, with other common limits sitting at £2 million and £5 million. You’ll easily find cover starting from £250,000 (suitable for start-ups and small businesses) but we strongly advise you over-insure; if the level of cover taken out isn’t sufficient for your requirements, then you’ll be liable to pay the remaining amount.
The main things to consider whilst taking out PI are:
- The size of the client contract: the bigger the client, the higher your PI limit should be.
- Compensation claims: if you’re working with a national client, like the NHS or BBC, compensation claims are likely to be huge. If you usually work with smaller companies (building websites for local retailers, for example), then you probably won’t be faced with such a huge hit.
- Legal costs: again, the bigger the client, the more expensive the trial can become. Consider how deep your client’s pockets are and ask yourself if you can match them.
Additional notes for media and creative contractors
No matter how scrupulous you are in your practice, Professional Indemnity not only offers peace of mind but also makes it much easier to attain new clients. Find out about the PI insurance we offer here.