Ashley Baxter is building With Jack, a platform that helps keep freelancers in business. Ashley enjoys sharing her experience of bootstrapping a business as a solo founder in one of the least start-up friendly industries in the world. In this guest article, she outlines why having business insurance is crucial for many freelancers.

Insurance should be a vital part of every freelancer’s toolbox alongside invoicing and working with a contract. Despite this, I’d estimate only a quarter of freelancers are properly insured. This is because insurers do a terrible job of explaining how insurance is useful to you and the type of risks you face on a regular basis.

We’re going to cover some of the common problems freelancers face and the role insurance plays in helping you in these situations.

Scope Creep

If you’ve been freelancing for a while you’re probably familiar with the term scope creep. It’s defined as continuous or uncontrolled growth in a project’s scope after the project begins.

Scope creep is harmful for the freelancer because it causes projects to go over timelines and budgets. In these situations, clients can even want extra work completed for free.

We saw this happen with one of our customers—a freelance developer who built a browser extension for a client. The client complained of missing functionality despite these features not being outlined in the initial spec.

The developer agreed to build the missing functionality for a further fee, but the client wasn’t happy. They withheld the payment that was owed to the developer and threatened to involve solicitors if the freelancer didn’t cooperate.

How does insurance help in this instance? Firstly, having a professional indemnity policy gives you the confidence to say no to scope creep. If a client wants you to complete extra work for free, you can stand your ground knowing that—if the situation escalates—you have a team of legal experts to help you.

In this instance there was already a threat of involving solicitors from the client, so the insurer appointed a team of lawyers to help the developer. They negotiated with the client to avoid the problem escalating.

Some professional indemnity policies have a clause that states they will pay you the amount owed to you by your client if your client is dissatisfied with your work, refuses to pay any or all of your fees and threatens to bring a claim against you.

With this example, the developer received £9000 from the insurer meaning they weren’t out of pocket for the work they’d already completed.

Missed Deadlines

Clients have important launch dates to meet and it’s part of a freelancer’s job to ensure deadlines are met.

For various reasons, deadlines can sometimes be missed. We’ve seen clients provide deliverables late or a freelancer’s circumstances change, meaning the project isn’t completed on time.

Even if these situations are out of your control, they can still lead to unhappy clients (and unhappy clients is why we have insurance!).

When one of our customers began work on a website redesign, a lot of things started to go wrong that contributed to the website not being fit for purpose on the launch date.

Having spent money drumming up buzz for the launch, the client wasn’t happy the deadline had been missed. They refused to pay the final invoice and threatened to involve solicitors if the freelancer pursued payment.

Further to that, they argued there were additional expenses due to the website not being completed on time. This included hiring new contractors, as well as loss of income due to losing those early customers.

It’s not uncommon to see situations like this unravel. They start off with one hiccup (missed deadline), but grow arms and legs (new contractor costs, loss of income).

How does insurance help in this instance? Having a professional indemnity policy in place meant the freelancer had access to a team of legal experts. The insurer helped the freelancer communicate with their client to try and recoup some of their unpaid fees.

When this wasn’t successful the unpaid invoice was settled by the insurer, who also provided an email to send to the client to confirm that the invoice would not be pursued on the basis the project is considered at an end.

Non-payment

Both of the examples above show how professional indemnity insurance can help with non-payment. However, the professional indemnity policy is only triggered if a client is unhappy and there appears to be the threat of a claim.

Would insurance help if a client decided not to pay for other reasons? Yes. Buried within the legal expenses policy wording is a ‘Contract and debt recovery’ clause.

This ensures you’re covered in the event of a breach of an agreement relating to the hire of services, provided that you’ve exhausted your normal credit control procedures.

In other words, if a client has went quiet and you’ve exhausted your usual tactics with chasing overdue invoices, an expert lawyer will formally chase your debt, including court proceedings, if required.

Difficult Clients

Even if there is no scope creep, missed deadlines or unpaid invoices, clients can be difficult in other ways. With all of the claims we’ve witnessed it’s very rarely been the fault of the freelancer. Sometimes you just get that one difficult client and the relationship breaks down. Being insured means you can lean on a crew of legal experts to help you.

Insurance can help you by:

  • removing the friction of finding the right lawyer and paying expensive, upfront fees
  • giving you the confidence to face client confrontations without suffering the financial consequences
  • preventing bad clients from taking advantage of you

If you’re in the UK, With Jack can help you be a confident freelancer. We offer a range of insurance products designed to help keep you in business starting from only £14 per month.