The Designer’s Guide to Insurance
The intention of insurance is to protect your assets, earnings and liabilities.
As a designer in business, you are exposed to many risks. An unexpected claim or loss can cause financial hardship and possibly destroy years of your hard work and investment. However, you can limit any potential damage by considering the available insurance covers that can protect your business.
CSD does not dictate how you arrange your insurances so you are free to do this as you see fit, from purchasing online products direct with an insurer to policies arranged through an insurance broker.
Given the complexities involved in insuring a business, our general recommendation is to take advice from an insurance broker.
The following guidance has been prepared by MFL Affinity, which is a trading style of McParland Finn Ltd Insurance Brokers. They have the necessary expertise to advise you and are authorised and regulated by the Financial Conduct Authority (FCA).
A brief explanation of Professional Indemnity Insurance (PII) cover
PII is a cover which protects you and your business from the potential financial and reputational consequences of any alleged breach of your professional duty.
The cover should be arranged under a “Civil Liability” wording. This means that, subject to terms and conditions, the policy will respond to any claims made against you or your business, rather than just negligence-only claims.
One key aspect is that the cover is provided on a “Claims Made Basis”, which means that the policy in force at the time the claim is made (rather than when the work was undertaken) deals with the claim.
PII is normally purchased on an annual basis. However, unlike other types of insurance, once the policy period has expired all cover for work undertaken by your business will cease. In effect, each year you are purchasing cover back to the inception of your business rather than just that year’s work.
If the policy you purchase is subject to a Retroactive Date, you must ensure this is the same date as the inception of your business. This will avoid any gaps in your protection.
When arranging PII cover, you should consider the following eight points:
- To protect your position, ask the Broker, if the insurance cover is being provided by an insurer who has at least an “A” Financial Rating or similar.
- Is the policy wording written on a full Civil Liability basis which would include cover for claims made against the Business for breaches of the General Data Protection Regulation (GDPR).
- Is the Limit of Indemnity adequate? There is no definition to describe adequate in this situation, but your Broker will be able to provide you with guidance when taking into consideration all of your business profiles and parameters. Insurance Brokers are not qualified to provide you with a definitive answer as to what is adequate, but should be able to assist you in the decision making process.
- What basis is the cover being provided on? It is likely to be more beneficial to the Member to obtain cover for “Each and Every Claim” rather than the more restricted limit of “in the annual aggregate” with any defence costs being be paid in addition.
- To limit your financial exposure, does the policy excess exclude defence costs?
- Does the policy provide some flexibility and allow it to be transferred into a “Run Off” policy which protects you in retirement or when you leave Private Professional Business. Run-off may be provided as an annually renewing policy or a single 6 year policy and your broker should be able to discuss your requirements in greater detail. As your liabilities may run beyond this period, as some contracts may require you to maintain cover for 12 years, it is also worth asking the broker if the policy can be extended beyond any initial period of run-off cover.
- Does the Insurer provide a Legal Business Advice Helpline, which should preferably be provided free of charge?
- Will you receive the advice and assistance of a Contract and Collateral Warranty Vetting Service, which should also be provided free of charge?
Other covers to consider
The available covers within the market place are numerous and varied, so below are some that you may wish to purchase. We have prioritised the covers which are legally required or where lack of cover could lead to adverse consequences for your balance sheet.
- Asset and Earnings Protection
For most businesses, an Office Combined policy would be the most cost-effective method of covering loss or damage to your assets (General Contents, IT Kit, Professional Kit, Tenant’s Improvements, etc.). It would also provide cover for any interruption to your business.
- Liabilities ProtectionUnder the PII, you have cover against your professional liabilities. You may also need Employers’ Liability cover (which, with limited exceptions, is a legal requirement) as well as Public Liability (Injury, Illness, Loss or Damage to Third Parties or Third Party Property). Both Employers and Public Liability can be adequately provided for under the Office Combined Policy.
In addition, you may want to consider cover against Corporate claims made against you as a consequence of how you run your business. These claims can evolve from a number of circumstances, including but not limited to:
- Breach of Company Law
- Breach of Accountancy or Taxation Legislation
- Breach of Health and Safety Legislation
- Breach of General Data Protection Regulation
- Defending claims made against you by competitors alleging malpractice
The cover provided by a Directors’ & Officers’ Policy should provide adequate cover for any potential claims arising out of the running of the business.
- Miscellaneous Protection
These miscellaneous covers are more than just “nice to have”:
- Crime: i.e. loss of your own cash/bank balances because of theft or fraud involving your own staff, other parties (including cyber criminals) or a combination of the two;
- Cyber: a package of covers including incident response, cyber-crime, system damage and business interruption, network security and privacy liability;
- Travel: package policies are available if you travel abroad in connection with your business;
- Legal Expenses: this would normally be part of an Office Policy with either no charge or at a negligible cost; and
- Motor Insurance: you can now purchase insurance for private cars used for business purposes and for small business vehicles via the plethora of online comparison sites. If this is not possible, your broker should be able to assist.
An insurance broker can properly advise you on the purchase of a portfolio of covers to meet your needs. MFL Affinity can offer special rates and services to CSD members – for further details, please visit the members’ area.