Sure, it’s a bore. Most insurance is. And we’re pretty sure you’d rather be reading an article called ‘5 reasons why you don’t need professional indemnity cover’.
It’s just one more expense to add to your already groaning overheads. And yet another insurance policy to add to your growing collection. Where will it all end?
But we wouldn’t be doing you any favours if we told you it’s not needed. (Although it might make us more popular.) Because the fact is, professional indemnity insurance (PI) can be a business saver.
Put simply, the main reason why you need professional indemnity cover is because it has your back if a client claims you didn’t do your job properly. It mops up the costs associated with the legal process, pays any compensation owed, and with any luck, upholds your reputation along the way.
But you probably don’t believe you’ll ever find yourself in such a pickle, right? Well, here are five things to convince you that protecting yourself with professional indemnity insurance is not just a good idea but a most excellent one. A necessity, even.
5 good reasons why you need professional indemnity cover
1. We all make mistakes
You might think you’re immune to messing up, but we all do it from time to time. Even the most professional professional gets things wrong on occasion. Or someone gets it wrong on their behalf.
Circumstances can conspire against you. Like someone you were relying on to do something doesn’t do it when they said they would, pushing a job behind schedule. Or they do it badly. Don’t forget you can be sued for your subcontractors' mistakes.
Also, disgruntled clients have a habit of making life very difficult if they think you've made a mistake, even when you haven't. Throwing lawsuits around, trashing your name in public, you know the kind of thing. That happens a lot.
And if they say it’s your fault a project’s gone badly wrong, they won’t just sue you for your part in it. They’ll want payback to the value of the whole contract. You’ll need deep pockets to cover that.
2. Your Ts & Cs aren’t enough
Asking a client to sign a contract before you start a job and having terms and conditions written in is always a good idea. They set out the parameters of how you’ll work, what’s expected, and what’s not.
You can make them as feisty and as detailed as you like. Seemingly watertight even.
Except, if something does go wrong, your client won't care two or even three hoots what your Ts & Cs say. If they're left out of pocket and think it's your fault, they'll want you to pay. And who can blame them? You'd do the same.
Worse, if a judge agrees with them, then you’ll be left facing a hefty bill for legal fees and damages. Time to ring your bank manager for one of ‘those’ conversations, then.
3. Your client isn’t always your friend
You may think the world of your clients and under normal circumstances, they might have a pretty high opinion of you too.
But that can quickly go out the window if there’s money involved. That seemingly easy-going Jekyll client can quickly turn into a Hyde if there’s any question they were sold short or didn’t get everything they paid for.
Building your working relationships on trust and transparency, with respect and good faith as the cornerstones is a good thing. But if you think there’s nothing that can’t be fixed with a chat, a handshake, and a smile, you could be in for a rude awakening.
Respect and good faith don’t really come into it when a client's asking why her project's gone £50k over budget. Or why her new website isn't generating the revenue you said it would. Or why she's got a big fine for filing a late tax return.
A not-so-friendly claim for compensation often follows.
4. You’re in it for the long run
One of the best things about running your own business is being your own boss. If you work on a contract basis it means you’re able to get in, get out, get paid and move on.
Commerce moves quickly and so do you. So, you might think you’ll never be around long enough to have to deal with any real headaches. Besides, once you're done it’s no longer your problem, right?
Wrong. Because your liability doesn’t just stop when your contract does. And mistakes can take weeks, months, even years to rear their ugly heads.
Contract length and timing is actually pretty irrelevant. And if your mistake has cost your client, no matter how far in the dim and distant past, they'll come after you regardless.
That puts you at risk of claims for the long-term, not the short.
5. The numbers add up
Maybe you view professional indemnity cover as an expensive luxury. You could do without having to shell out for yet another monthly Direct Debit. (Interest-free, by the way.)
There are many, many more important things you could spend a couple of hundred quid on. That new iPhone, for example. Or a caramel latte every other day (don't forget the croissant).
Besides which, if something does go wrong, you can call your solicitor for help. They only charge about £150 an hour or something.
In reality, legal claims can be complicated, long-winded, and very costly. If a client sues you, you’ll need expert legal advice of your own to help you get the best outcome.
You also run the risk of having to settle the claim or, if it goes to court, of a judge ruling against you. The cost of your legal bills and any compensation can run into many £thousands, even £tens and £hundreds of thousands.
That makes professional indemnity insurance seem cheap at the price.
So that’s why you need professional indemnity cover
There are more reasons why professional indemnity insurance is a good idea. Like being able to sleep easier at night, knowing your business is protected. But we promised to stop at five.
Sexy and exciting it isn’t. But what PI is, is dependable, which counts for a lot in an uncertain world. It’s also recognised and respected, which is why a lot of contracts and professional associations demand you have it.
Click on the link to find out more about professional indemnity insurance or to get a quote. Or you can call the team on 0345 222 5391.managing riskterms and conditions