For freelancers, it is empowering to work on your own terms and do something you love. However, it can also expose you to risks and liabilities you wouldn’t otherwise face as an employee.
The type of service you provide and how you structure your day-to-day business activities plays a large role in what type of business insurance you should consider.
Why Is Business Insurance for Freelancers Important?
There can be a lot of grey areas to navigate as you start to get your feet wet with your freelance business. Most commercial business insurance plans are confusing or don’t appeal to freelancers. But that doesn’t mean you shouldn’t be protected!
Freelancers are subject to the same risks of liability and property loss as larger businesses. So, if you are a freelancer, consider the following when it comes to choosing if business insurance is right for you.
Homeowners and Personal Insurance Does Not Cover Business Activities
If you work out of your home you may think that liability is covered under your homeowner's insurance. Unfortunately, that is often not the case.
If you are hosting a client meeting and something happens (like a slip or fall), you may be left out of pocket for medical expenses. This is because a homeowners insurance policy will likely not cover the liability expenses related to professional activities.
Likewise, a homeowner’s insurance policy may cover a limited amount of business property — but only up to a certain amount.
As freelancers, gadgets like your computer or camera are at the center of everything you do and a loss could be financially detrimental. So, protecting your equipment is important. Check your homeowners policy and consider increasing your coverage by adding contents insurance.
If you are a renter, consult your landlord to find out what you are covered for. In most cases, it's likely the contents of your home (where you store your business equipment) will be covered as part of the landlord's insurance plan. If not, consider investing in renters or tenants insurance.
Types of Business Insurance for Freelancers
Business insurance is a catch-all term. There are different types of coverage that go into crafting a business insurance policy. Some of the top types of insurance coverage that freelancers should consider are as follows:
General Liability Insurance
If your business is in physical contact with customers or the general public, you have a duty of care. In this instance, a general liability insurance policy is typically recommended.
This policy will protect you against financial costs associated with a physical product that is defective. It will also cover you if a customer suffers injuries due to your negligence.
Professional Liability Insurance
Professional liability insurance (also called errors and omissions insurance) is often the most relevant type of insurance for online freelancers. It safeguards freelancers against legal action from dissatisfied clients if they suffer a financial loss as a result of one of your decisions.
Freelancers are human, and mistakes can happen. This type of coverage protects you against human error.
If the majority of your work is performed online and you deal with sensitive information like credit cards, cyber liability insurance may be necessary. This type of policy will help you to recover lost data, lost income, and other expenses associated with cyber attacks like notifying affected clients.
Personal Health Insurance
As a freelancer, you don’t have a company to cover your medical expenses. Therefore, it is always a smart investment to add medical, dental, or disability insurance to your health plan.
If you have children or dependents, a life insurance plan may protect them from any financial strain in the event of an untimely death.
What Kind of Freelance Business Insurance Do You Need?
As unsatisfying as it may sound, there is no catch-all rule for freelancers. You will need to consult your insurance provider and explain your day-to-day activities for them to assess the different kinds of risks associated with your business.
They may also suggest other types of insurance coverage such as:
- Commercial auto insurance
- Special event insurance
- Business interruption insurance
It simply depends on what you do.
Business insurance always seems like a pain until you have to make a claim. Freelancers are often working within tight budgets so don’t put yourself in a position where an unexpected financial burden could cause the demise of your business.
As your freelancing business continues to grow, check back in with your insurance broker. They will revisit your policy to ensure it continues to meet your needs as you morph and become more successful in your career.
About the Author
Alanna Luc is an insurance professional from Jeffrey & Spence Insurance Brokers. She is passionate about getting small business owners the type of business insurance coverage they need. When not shopping around for the best prices on insurance she is hiking or spending time with her family.
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