You will be able to identify the business risks in your work and the cover or contract terms that handle each.
A freelance event planner hires a stage, sets it up in a hotel ballroom and runs the evening. A guest trips over a cable and breaks an ankle. A month later a letter arrives from a lawyer. Or take a freelance consultant whose spreadsheet model contains an error that leads a client to underprice a contract. Or a videographer whose only camera is stolen from a taxi the day before a wedding shoot. Each of these is a business risk, and in a sole proprietorship, lesson 5.2 showed, a business risk is a personal one.
This lesson covers the main business risks and the two tools that handle them: insurance and contract terms.
Professional indemnity cover pays if a client claims that your advice or work caused them a financial loss, along with the legal costs of defending the claim. It matters most for work where clients act on what you deliver: consulting, IT, design for print runs, financial or engineering calculations, and writing that others rely on.
Some clients, especially larger companies, require suppliers to hold professional indemnity cover and ask for proof before they sign. For some regulated professions, a regulator sets its own requirements.
The consultant with the spreadsheet error is the case it is built for. Without cover, the claim and the lawyer's bill fall on her.
Public liability cover pays if a third party is injured, or their property is damaged, because of your business activities. It suits work done at other people's premises or in public: events, photography and video shoots, installations, fitness classes, home services.
The event planner's guest is the case here. So is a photographer whose light stand falls and cracks a client's glass table. Some venues require freelancers working on their premises to hold public liability cover.
For many freelancers, the business is one or two pieces of equipment. A laptop, a camera, a set of tools, a car. If it is stolen or broken, you lose the cost of replacing it and the work you cannot do until you do.
Equipment cover pays to repair or replace business equipment that is damaged or stolen, subject to the policy terms. Home contents policies often exclude business equipment or limit it, so check before assuming yours is covered. A driver's vehicle insurance is a separate matter with its own rules.
Ask yourself one question: if this item vanished tomorrow, could I keep earning? If the answer is no, and replacing it would hurt your buffer, it belongs on your cover list.
Insurance pays after something goes wrong. A good contract reduces how much can go wrong, and how much you owe when it does. And it costs nothing beyond the time to write it.
Two kinds of terms do most of the work. A clear scope of work says exactly what you will deliver, by when, with how many rounds of revisions, and what is not included. Most client disputes start with a gap between what the client thought they were buying and what you thought you were selling, and a written scope closes that gap.
A limitation of liability clause caps what you can owe if something goes wrong, often at the fee paid for the job. Whether a court would enforce a particular clause depends on the wording and the circumstances, so for larger contracts it is worth having a lawyer look at your standard terms.
Payment terms belong here too. A deposit before work starts reduces your loss if a client never pays, and lesson 7.3 covers it. Unpaid invoices are a business risk like any other, and contract terms are the main protection against them.
Different freelancers need different mixes. Mei designs for clients, works at home and meets clients in cafes. Her main risk is a client claiming a design caused a loss, such as a printing error at volume or an image used without the right licence. Contract terms on image sourcing and approvals handle most of it, and she is weighing professional indemnity cover for larger jobs. Public liability matters little for her. Equipment cover matters a lot, because one broken laptop stops her work.
Hafiz faces a different list. Accidents on the road are his main risk, handled by his vehicle insurance and the work injury cover that lesson 3.3 described. Professional indemnity barely applies to his work.
Think about your last few jobs and the ways each could have gone wrong for the client. For each one, ask whether a contract term or a policy would have handled it, or whether nothing would have.
List the three ways your work could cause a client a loss and write whether a contract term or insurance covers each.
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