We’re often asked if we do short-term professional indemnity insurance policies. And our answer is, usually, yes we do – with one pretty significant caveat.
Here it is: if you buy insurance specifically for the length of a contract, you're covered only while the policy is live.
If you cancel the policy after the contract’s finished, it's as if you'd never had insurance. If a claim is made against you for work you did on that contract, after you've cancelled your policy, you're not covered. At all.
It’s probably worth reading that last paragraph again, just to make sure you got it.
Short-term professional indemnity policy = long-term risk
But if you think the answer is to spend as little as you can on, say, three months’ cover rather than twelve, think again. It could end up costing you far, far more.
Often, your clients will ask you to have professional indemnity insurance (they might call it professional liability insurance) before you start work for them. Nothing too unusual about that.
Why? Because professional indemnity is different to other insurance. It’s what’s called a ‘claims made’ policy.
That means, in simple terms, for a claim against you to be covered, your policy has to be in force at two points:
▪ when you did the work
▪ when the claim is made.
If you cancel your cover as soon as you finish a contract, and there’s a claim against you, say, two weeks after that, you're not covered. Even if it relates to work you did when the policy was in place.
It’s easy to assume that because you bought and paid for insurance at the time you were working, its cover still applies when it’s cancelled. Unfortunately, that’s not the case.
The need to know
Now, we completely understand the reasons why many freelancers and contractors opt for short-term cover. It’s one less hassle and expense to worry about and for many, those benefits outweigh the risks.
But the fact remains there is a risk attached to short-term professional indemnity insurance cover...and you need to be aware of it.
Just make sure you do your homework before you start your contract. Take an objective look at the work involved and if you think you could be in any way liable for anything going wrong, especially after the contract’s finished, you should think long and hard about the cover you need.
You might just have to accept that, for you and your business, a long-term solution is best.
Far be it from us to dictate what insurance you should and shouldn’t have. Things aren’t always what they seem, however, and we think you need the big picture before you make an informed decision.
At least now you have it.
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