Do You Need Insurance If You Freelance?

 By Diane Tait

Image courtesy Pixabay

Freelancing has never been more popular.  Whether it’s to make some extra income or is a full-time proposition, being a freelancer means never having to deal with the boss looking over your shoulder ever again.  Many stay-at-home moms and dads embrace it for the time flexibility it provides.  Some who have lost their jobs or are now working at home due to COVID-19 enjoy the ability to turn time into money anytime they choose.  With more than 57 million Americans (1/3 of the workforce) currently participating in the Gig Economy, freelancing has never been more popular.   If you currently freelance or are thinking about it, here’s what you need to know from an insurance perspective.

There’s no business like a home business.

If you’ve never done so before, let me be the first one to tell you that working from home can be a blessing or a curse.  While most who have worked in an office think that it would be great to be able to work from home, there are a few things they don’t realize:

1. You can’t do meaningful work if your kids are running around behind you making noise.  Whether your freelance model deals with customers on the phone or not, you won’t be able to complete your job if the kids are within earshot.  You need a separate workspace in order to complete most assigned tasks, let alone interface with clients.
2. Just as with any other business, if you want to get paid to freelance, you need to complete your tasks on time.  This means you need to block off time and organize your workspace so you can meet any deadline. 
3. If you fail to deliver the goods on time or if you deliver a product or service that harms your client, you can be held liable. 
4. If something should happen that derails your business (i.e. theft or fire), your homeowner’s policy won’t cover the cost to repair or replace your office equipment.

Would you start a business without insurance?

The fact of the matter is a freelance business is still a business.  Whether you work as a designer, a writer, a programmer, or a consultant, your freelance business will face many potential liabilities, including, theft, security breaches, and copyright infringement.  Should you fail a client in any way, you could be subjected to a lawsuit that could cost you dearly, even if you’re later found to be blameless.  On top of that, some clients and agencies will only work with freelancers who are bonded and/or insured.  Before they’ll sign a contract with you, they need to be assured that you’re responsible for the product or service they’ll receive.  Last but not least, having business insurance can give you a competitive edge when it comes to negotiating a contract since companies like to work with freelancers they know they can rely on to get the job done.

What kind of insurance do freelancers need?

Just as there is no one-size-fits-all freelancer, there is no single insurance policy that covers all freelancers.  Depending on the kind of work you do, you may require as many as seven different kinds of professional insurance to protect your freelance business:

1. Property insurance pays to repair or replace business equipment damaged or destroyed by fire or theft.  If you use a lot of expensive computers, printers, and/or other specialized electronic equipment for business purposes, you should look into obtaining this in addition to your homeowner’s or renter’s policy.
2. General liability insurance covers you for everything from injuries sustained by a client who is injured while visiting your office to libel, slander and copyright infringement.  It can also be vital to helping you lease office space if you decide not to work from home.
3. Professional liability insurance is there to cover your legal expenses were you to get sued by a client who sues you for negligence.  This policy is also called an errors and omissions policy. This kind of insurance is vital to any freelancer who works on a deadline.  Should you fail to deliver the goods to a client on time, you not only risk being fired, but you could also be sued for reneging on the contract. Should that happen, professional liability insurance will help pay for legal expenses and judgments against you.
4. Commercial auto insurance can save you a bundle if you’re involved in an accident while using your vehicle for business purposes.  This would include everything from delivering products to a client to driving to meet a client.  It can also be vital should the products you were delivering to a client be stolen from your vehicle.  Don’t believe that your current auto policy will cover any of the above-mentioned items since most insurers specifically exclude accidents or losses that occur during business trips.
5. Cyber insurance is vital if you routinely handle or store sensitive data for clients.  This can include everything from credit card numbers to intellectual property.  Should your computer be hacked, your clients could not only sue you, but the court could order you to conduct an expensive system audit to determine what data has been compromised.  You could also find your data encrypted or erased due to ransomware.
6. Bonding could be required if you freelance in the IT or financial industries.  By bonding you, an insurer agrees to pay a specified amount if you don’t deliver what you promised to a client. Bonding can also help protect you against theft, fraud, or data breaches related to your freelance business.
7. Health & disability insurance is important if you are no longer covered by an employer or spouse. 

How do you know what kind of freelance insurance is right for you?

The best way to determine the proper coverage for your freelance business is to call your insurance agent.  Not only can he or she help you determine the right kind of coverage you need, but they can help you determine how much coverage you need to get to enjoy the freedom of freelancing.

Diane Tait owns and operates A&B Insurance.  To find out more about how you can save money on boat insurance, go to her site.