As a freelance consultant you want all your contracts to go smoothly and your clients to be happy with your work. In return, you hope they will pay you on time & engage your services on a regular basis. Sometimes however events can take a turn for the worse. Errors may unintentionally creep into your work, resulting in financial loss to your clients and a potentially ruinous liability claim being made against you. Professional indemnity insurance protects you & your business against such claims.

Anyone who takes a fee for providing 'advice' that a client relies upon is considered a 'professional'. By law, 'professionals' owe their clients a legal duty of care, if this duty is breached by a negligent action for example, clients can claim compensation for losses and damages caused by one's negligence.

Professions like Accountants, Lawyers, Architects, Surveyors and Medical professionals all legally require professional indemnity insurance to trade. In recent years its also become common for freelancers working in a wide range of industries like IT, Engineering, Design & Business Consulting to maintain policies, largely because clients now insist on PI cover being in place before they award contracts. 

Professional indemnity insurance covers you against legal costs that may arise as a result of a client filing a lawsuit against you due to negligent actions. Even if the allegations are untrue you still need to defend yourself and the legal costs can be crippling. Without adequate insurance your business and even your home could be put on the line. A professional indemnity policy safeguards you against these costs providing legal power to fight your status and reputation. If you are held liable, the policy will also cover any compensation payments.

As a business owner, no-one knows their business and its risks better than you. A lot of clients will have mandatory limits of indemnity in their terms of business with you. Other assignments may require you to make a judgement based on how hazardous or litigious the sector is. Also, if your responsible for big projects & sign offs you may want to consider a higher level of cover. The best advice is to buy as much cover as you can reasonably afford as if you are involved in a lawsuite, the last thing you need is to be underinsured whereby your legal fees exceed your level of cover.