When you become a freelancer, you’re also starting a small business — even if you’re just a business of one! This means you need to start thinking about how to build your business strategically, and you should consider how to protect your business from theft, natural disasters, and liability. The best place to start: Purchasing insurance.
Insurance of any kind can seem like a complicated offering. Most of us are conditioned to acknowledge the value of having auto insurance, just in case something happens to us on the road. Medical insurance helps cut the costs of a potential major accident, and renters insurance and homeowners insurance are also required in many scenarios.
But when you’re starting a new business as a freelancer, it might be difficult to imagine shelling out monthly payments for “just in case” scenarios. That said, the protection you can get — for an oft-low cost — is usually worth it, depending on the kind of work you do.
Here are some types of insurance to consider, as well as questions to ask as you check out various plans:
Who needs insurance
Here are some important questions to ask yourself:
Do you have assets in your personal life that need to be safeguarded?
If a fire destroyed your place of business, would you struggle to reopen?
If you make a mistake and a client sues you, could a lawsuit destroy your financial stability?
Do you intend to work with clients who will require you to carry business insurance?
If you answered yes to these questions, you might want to consider purchasing insurance of some kind to cover your business proceedings.
General Liability Insurance
It doesn’t matter which industry you’re in; whether it’s web design, marketing, writing, software development, consulting, or beyond, you face liability risks. If you’re a freelancer, you’re typically not covered by your clients’ insurance — but those same clients could take legal action against you if you make a mistake that costs them money or their reputation.
General liability insurance protects you from potential legal action. If someone sues you or if there’s some kind of property damage in a place where you’ve worked, you won’t have to pay for the legal fees or repairs. Many policies also cover claims of slander, libel or copyright infringement. General liability insurance can cost several hundred dollars per month, depending on your industry and the level of risk the insurance company is taking on.
There are a few other kinds of liability insurance for freelancers, including:
General (the basics, listed above)
Professional (this typically includes errors or omissions insurance and covers a client claiming that you were negligent)
Product (this covers suits for faulty products and is useful for designers, wholesalers, and retailers)
If you own a workspace, studio or storefront, or you carry equipment around with you to help you do your freelance work, you might consider property insurance. This type of plan typically covers damages caused by electrical or water damage, as well as theft. It can cost a few thousand dollars per year.
Commercial auto insurance
If you use your car to get to and from client meetings and events, your vehicle is being used for business purposes — which may not be covered under your personal auto policy. Check your existing policy and ask to add an extra business contingency into the plan, if needed.
Tips for choosing an insurance plan:
Previously, any search for insurance would start with contacting a broker. But now, there are several online options you can consider: NEXT Insurance or Thimble that offer low cost insurance plans for any type of business, housekeepers, photographers, constructions, make-up artists, writers… are a good place to start. The Freelancer’s Union also carries a liability plan for people who work for themselves.
When you start looking, you should compare prices by getting quotes from multiple insurance companies. Do your research about the laws in your state that might require you to have insurance. (If you’re working out of a venue for a wedding, for example, that venue might require proof of insurance.) Ask other freelancers in your circle if they have insurance, too.
Once you’ve signed up, regularly review your policies to make sure that they cover what you need them to cover as your business grows and changes. If you see an increase in inventory, or you end up hiring employees or subcontractors, you’ll need to change your plan to cover those other assets and people, too.