These days, freelancing is an integral part of our professional lives. If you’re in an agency, you may be upping your use of freelancers, or considering them for ad hoc projects for the first time.
There are plenty of advantages to doing so. But there are also particular pressures and risks that come with using someone who’s not in your company.
We want you to safely and confidently engage the services of a freelancer. That’s why we’ve written this quick guide to the protections needed. It’s by no means exhaustive – and remember, every situation is different – but it’s a good starting point for your relationship.
What insurance should freelancers have in place?
The exact type of insurance your freelancer may need can vary immensely. The role, capacity and nature of their workload can range across industries and skill sets.
You might have a number of coders, for instance, with their own preferred coding language. Equally, some designers are better for large-scale, multi-department creative projects, whereas others are used for a final touch-up on in-house work. Deliverables therefore are subject to change, which means the exact protection cover can change from freelancer to freelancer too.
However, you would generally ask for the following, most common types of insurance:
This is normally the most important insurance to confirm from the outset. It guards against mistakes and financial loss as a result of the services provided.
The freelancer could produce a very sub-par piece of work, leading to severe consequences for your business. If that happens, professional indemnity pays out compensation. It also pays for the freelancer’s legal team if they have to defend themselves against a defamation claim, and you’re additionally covered for the negligent transmission of a computer virus.
We also suggest checking that the freelancer’s insurance includes cover against breaches of confidentiality. This protects you in the event that they disclose any private information to a third party.
When you’re deciding on a limit of indemnity (the total amount of cover), weigh up how much is riding on the project. £1,000,000 is usually a good starting point, but £250,000 should be fine for small, simple tasks.
Public liability insures for any physical task in the office, on-site or at an events space. It means the freelancer is covered for injuries they sustain or cause, either by accident or wilfulness, and any damages to the property itself.
It counts for your clients too, who may otherwise sue your agency in the event of a freelancer’s misdemeanour on their company grounds. Again, if the contractor is not delivering anything physical, a recommended limit of liability can start at £1,000,000.
Depending on the project being undertaken by the freelancer, they may require more specialised insurance packages, such as in-depth cyber cover for identity theft, security transgressions or data wipes.
How can my agency manage risk?
It’s really quite simple – include in your contract an explicit reference to the insurance you expect the freelancer to have. Detail exactly what the insurance should cover, and draw the freelancer’s attention to it before they agree to provide any service.
Ensure you keep their insurance details on file for easy retrieval too. This should include the insurer’s name, the kind of insurance they have, their policy number, the renewal date and the limit applicable. Having this to hand immediately protects against something else as well – the risk of the freelancer ghosting you if an issue arises. It means you can go direct to the freelancer’s insurer to resolve the matter quickly.
What about my agency’s own insurance?
Occasionally, some insurers ask that an agency’s policy is distinctive in one key way. They might want the freelancer or consultant to have the same level of cover as the agency itself.
In practice, a freelancer could feasibly make a mistake but, unless they’re protected to the same extent as the agency, the insurers won’t have to pay out – and the agency could
still be sued. It makes sense, because the insurers can recoup any losses when the freelancer is at fault.
At the same time, it unfairly exposes your agency. How? The freelancer may:
– Claim they have adequate insurance, but really don’t (for example, they may be a designer but might not be covered for IP infringement)
– Mistakenly arrange the wrong insurance policy (for example, they may be a web design agency but the policy is for management consultants)
– Fabricate financial documents, or exaggerate details of the work they carry out, during their policy arrangement (a common occurrence with Statement of Fact-based policies)
– Forget to renew their policy or default on paying their premium
In the event that any of these points are found to be true, your agency is liable. Any clause stating that a freelancer must have the same insurance level as you, unfortunately, invalidates that of the agency.
As a rule, we don’t recommend policies that include such a clause at all. Ensure you scour every piece of small print to confirm nothing like it exists in the policies you take out.
Still unsure what to expect from a freelancer as an agency? Speak to RiskBox for advice on precise, tailored cover for your freelancing workforce. We’d be more than happy to help.