Business Insurance Requirements for UK Freelancers

Working as a freelancer is a brilliant option for a lot of people, providing both income and a flexible work situation. However, without the legal protections of working as an employee for a company, a freelancer needs to buy their own insurance (as with all self employed people) to avoid potential financial disaster. Read about popular types of business insurance for freelancers in the UK—learn what they cover so you can decide what you need.

• What types of business insurance are popular with successful freelancers?
• What types of freelance insurance do I really need?
• How much does insurance cost for a freelancer?
• FAQs

What are Popular Types of Freelance Insurance?

While each freelancer is unique, there are a few types of business insurance that are consistently popular with freelancers and self-employed people across the board. Whether you're just setting up as a freelancer or an experienced gig worker, you'll need cover. Below we explain what each one generally covers, and provide some real-life examples to help you decide which you need given your individual situation. If you still have questions, fill out a quote form and someone will call you back.

Public Liability Insurance for Freelancers

Public Liability insurance is critical for freelancers dealing in person with members of the public, whether they're customers, clients, your landlord or even a passerby. Why? If a customer or someone you're in contact with is accidentally injured, or their property is damaged, they can blame you and sue you.

Public liability insurance protects freelancers against accidental injury and damage claims, covering both legal expenses to defend your business and compensation claims if you're found liable. How much public liability insurance do you need as a freelancer? It's a personal decision but, for reference, public liability insurance is typically available with £1 million, £2 million, £5 million and £10 million of cover in the UK.

Product Liability Insurance

Product Liability insurance protects against claims of bodily injury or property damage due to a business's goods or products. You might need this insurance if you design, make and/or sell a product from food to toys to hand-knit sweaters, or if you fix things. Even tradespeople like builders, plumbers and electricians should have product liability insurance, as well as those selling on ebay, Etsy, Amazon and the like.

Professional Indemnity Insurance for Freelancers

Professional Indemnity (PI) insurance protects freelancers selling advice or professional services—in other words, your expertise. PI insurance helps if a client claims that your advice or service was negligent (for example, you've made a mistake or error in your work) and causes them a financial loss, and it will cover your legal defence fees as well as any compensation you need to pay.

Depending on the freelance work you do, some clients might contractually require that you hold PI insurance. Freelance professions that might need professional indemnity insurance include, but are not limited to:

Note: Professions like hairstylists, beauty therapists and massage therapists should look into a product very similar to professional liability insurance called "treatment cover", which covers injuries to your customers or clients that occur during or due to your work.

Employers' Liability Insurance

If your business is booming and you hire employees to help out, you'll need to buy employers' liability insurance (EL)—it's required by law even if you just employ casual or temporary workers. There are a few exceptions, of course, when you don't need cover.

EL insurance can feel expensive compared to other types of business insurance but it protects against compensation claims by current or former employees if they fall ill or are injured because of their work for you. It covers both legal fees in defending yourself from a claim and any compensation you're required to pay.

Contents, Equipment and Stock Cover

Contents insurance can cover you against accidental damage, loss or theft of valuable equipment, furniture & furnishings, computers and other business items that can be expensive to replace. Having contents cover not only protects you financially for the value of these goods, it also helps get you back up and running if you do face a disaster like fire, flood or theft. Whether you rent your premises or own them, contents cover can be a critical component of insurance for someone who's working freelance.

Those holding valuable stock can pay an extra premium for stock coverage, which is typically offered as an add-on insurance option. Stock cover provides financial protection if your stock is lost, stolen or damaged. Note that there are exclusions—e.g., typically frozen food and a general deterioration in stock are not covered.

Business Use Car Insurance

Declaring business use on your personal car insurance is critical if you drive between multiple work locations or to see your clients. If you use your car in these ways but don't declare business use, then your regular car insurance (e.g., social, domestic and pleasure driving, commuting) could be deemed invalid and you'd essentially be driving uninsured.

There are three classes of business use. Class 1 covers driving away from your regular place of business, for instance to multiple work sites or to visit clients. Class 1 can cover spouses as long as they're driving for your business. Class 2 would cover a named driver such as an employee or co-worker. Class 3 ("commercial travelling") is really only for the type of driving done by travelling salespeople.

Note: There are circumstances in which "business use" is not sufficient and you need a Who needs commercial vehicle insurance? instead. For instance if you get paid to deliver goods you'd need courier insurance and if you get paid to transport people then you need a form of taxi insurance.

Legal Expenses and Tax Investigation Insurance

Broadly speaking, legal expenses policies cover situations that are not covered by other types of liability insurance like employee injury claims, third party damage claims, etc. Business legal expenses insurance (LEI) gives you access to an expert legal team and pays your legal defence costs in certain situations up to the policy limit for situations such as:

IT and Cyber insurance

If you worry about getting hacked or you process payment card information or store sensitive customer information such as names, addresses, banking information or other personal data then it's a good idea to consider cyber insurance. Cyber insurance covers losses related to hacking, data breaches, viruses and other cyber crimes, covering direct costs incurred by your business and also claims from third parties that were harmed by an attack on your business.

Personal Accident Insurance

If you have an accident that leaves you unable to work, personal accident insurance can pay you a sum of money. This type of cover pays out a benefit as a weekly amount or a lump sum payment to help with lost income while you’re out of work due to a workplace injury (or sometimes any injury, even away from the workplace). You can learn more about other types of personal insurance from the Money Advice Service.

Other Types of insurance for freelancers

Freelancers might also want other types of business insurance to protect against illness and even business interruption in case your business premises are physically damaged in a fire, flood or storm (FYI business interruption insurance doesn't typically cover lost revenues due to situations such as the Covid-19 lockdown).

Does a Freelancer Really Need Insurance?

There are many circumstances in which the right insurance can help a freelancer who is sued or facing a financial loss, from liability claims to loss or damage to your property.

Even if a liability claim is unfounded and you've done nothing wrong, you'd still need to hire and pay for legal assistance to defend yourself in case of a claim. And this is likely to cost thousands of pounds. If you are found liable, then you'll have to make a compensation payment. Depending on the size of the financial loss absorbed by your client, your compensation payment could reach into the tens or hundreds of thousands of pounds, or even more in rare circumstances.

When you need public liability insurance: The most common type of liability insurance for a freelancer would probably be public liability insurance, which protects against claims of accidental injury or damage made by third parties. Public liability insurance is usually needed if you have in-person exposure to clients or other members of the public, or their property.

When you need professional insurance: If you give advice or offer a service (e.g., a garden designer or architect) then professional indemnity insurance can protect against claims made by clients that you haven't done your job properly.

When you need employers' liability insurance: If you hire any employees, you're required by law to hold employers' liability insurance in most cases.

When you need to declare "business use" on your car insurance: You will need to declare business use on your car insurance if you drive to clients or visit multiple work locations. (People paid to make deliveries or transport passengers need a form of Who needs commercial vehicle insurance?).

Common Types of Freelancers Needing Insurance

Cost of Freelance Insurance

How much does insurance cost for a freelancer? It depends on what types of cover you need and what type of work you do, among other factors. Here are some typical ranges so you can get a sense of what you might pay. You'll notice that the biggest variation of price comes from professional indemnity insurance. This type of business insurance protects against negligence and mistakes. For industries where a client can lose a lot of money if a professional doesn't deliver, professional indemnity insurance can be very expensive (e.g., for architects).

FAQs