Learn why freelancers and independent contractors need business insurance for protection and growth. Freelancing has been one of the best career choices for many people in recent years due to the flexibility, independence and the different kinds of clients one is able to work with. That being said, working independently has its own share of responsibilities, one of those being business insurance, something many are inclined to overlook. Regardless of whether you are a graphic designer, a writer, a consultant or a developer, freelance business policies are essential to protect your business and individual assets from risks. In this article, we’ll discuss the common types of insurance policies freelancers need, how each of them can be beneficial for your business, and how to safeguard your freelance business against unforeseen circumstances.
How Freelancers Can Make Use of Business Insurance
A freelancer does not have the same level of comfort that is associated with a traditional employee who has certain perks, business insurances manage to act as the insurance for that gap. They provide coverage for a number of services that have risks that threaten the day-to-day operations of a freelance business including lawsuits, property damage and loss of revenue. Business insurance though seen as an added cost by many can be useful in risk management in too many freelancers to ignore.
Though some types of coverage may not be legal requirements, having them is important so that your work and finances are both safeguarded. Here we will take a closer look at the types of insurance that freelancers must look for.
1. General liability insurance: This insurance safeguards your name from damage and defends your assets.
Out of the various other insurances that freelancers ensure, this is one of the most basic ones. This policy protects against Third party claims for expenses caused by non-intentional acts of the business. For example, clients who sustain injuries after stumbling over wires in your office space, or similar clients who suffer during meetings due to injuries generally take liability insurance which pays for everybody’s medical expenses, lawyers, and damages without compromising the company’s integrity.
Key Benefits of General Liability Insurance:
- Protection from allegations and claims from third parties regarding damage or injury caused to them.
- Lawyers and associated expenses are covered under general liability insurance.
- Advertising debts that include slander, false advertisements and copying someone’s ideas are also covered under basic liability insurance.
Almost all freelancers especially those who do site visits will most definitely need this insurance covering themselves. It is also good for peace of mind in case of an accident happening especially when working far from your home office.
2. D&O or E&O insurance – Professional Liability Insurance (otherwise also known as Errors & Omissions Insurance)
LinkedIn experts revealed how professional liability insurance, also called as the errors and omissions (E&O) insurance has high significance to freelancers rendering their services in consultation, writing, marketing, design and other service fields. The insurance is valid for services that have been delivered and there are accusations of negligence, errors or failure to deliver as promised. For instance, if a client claims to you caused a loss by not delivering as expected, this insurance can take care of the court costs and settlement expenses.
Key Benefits of Professional Liability Insurance:
- Provides coverage for claims that are made against clients in connection with negligent acts, errors or omissions during the performance of professional services.
- Provides coverage towards the expenses incurred in the defense of the business through payment of the legal and court costs.
- Offers provision towards the damage caused to the financials of the client on suspicion that the clients work caused such a loss.
As a freelancer, everything revolves around you and your reputation which means that professional liability insurance would assist you in the unfortunate event that not everything goes according to plan.
3. Business Property Insurance: safeguarding your equipment and assets
As a freelancer, you need equipment for your job: laptop, camera or some bespoke tools. Business property insurance covers burglars who inflict damage on your possessions, business equipment, and any other loss. This type of insurance may also cover damage or loss of equipment when operating a home office.
Key Benefits of Business Property Insurance:
- Physical loss or damage to the business or working tools including office furniture.
- Coverage where the worker works from the office and even at home.
- Effect payment out of pocket for losses or damages that affect the equipment’s, tools, or business’s operational capabilities.
In case your freelance business requires specific tools and machines to perform tasks, it makes sense to take business property insurance so that operations don’t come to a halt.
4. Workers’ Compensation Insurance: Freelancers with Employees or Contractors
If your freelance practice involves employing (or subcontracting) then you need absolutely workers’ compensation insurance. It is liable to pay medical bills and allowances for employees who get hurt whilst performing their duties. Although independent contractors don’t need to have workers’ compensation for themselves, this is a requirement for an employer that has employees.
Important Advantages of using Workers Compensation Insurance:
- Pays medical expenses and lost wages to employee is injured on duty.
- Insurance against lawsuits from employees injured during work-related activities.
- In many states law requires this if you have employees.
- Freelance employees that expand their businesses to include other employees should promptly acquire workers compensation insurance to suit the law and protect their staff members.
5. Cyber Liability Insurance: Protection Against Online Business Risks.
These days information technology is a threatening issue for freelancers that have clients’ details kept online, use technologically driven spaces, or degrade confidential information. This covers cybersecurity threats such as data breach incidents, hacking, and cybercrime. This is highly important for freelancers dealing with clients’ financial details or personal information or some other proprietary business information.
Key Benefits of using Cyber Liability Insurance:
- Provides reimbursement for expenses related to data breach incidents including attorney fees, costs to notify clients and costs of monitoring credit for affected customers.
- Protects in the event of cyber threats and hacking events which cause interruptions in business activities.
- Offers protection against allegations of stealing data and violation of privacy.
We live in times where cyber threats are on the rise thus freelancers who do their work online should consider acquiring cyber liability insurance cover as it offers protection against the mentioned risk.
6. Health Insurance: Looking out for Your Health as a Self-employed worker
Health insurance is one of the essential types of insurance cover that self-employed individuals need. Self-employed freelancers don’t obtain health benefits like regular employees of a large corporation do. Even if someone purchases an individual health insurance plan or acquires medical cover from the marketplace, medical cover assists in normal checkups, emergencies and buying medication.
Main advantages of having health insurance include:
- Medical expenses such as visits to a doctor, undergoing surgery, buying drugs, and going for emergency treatments are covered.
- Involves provision for wellbeing and making healthy lifestyle choices in order to avoid getting ill in the first place.
- Provides redress against the cost of unplanned continue of medical events.
- Having health insurance as a self-employed individual makes sure that you do get the treatment that you need during situations when time is of the essence without having to empty your bank accounts.
7. Income Protection Insurance: A Shelter for the Self-Employed
Most bemoan the steady month-to-month earnings and perks that most regular employees are accustomed to, and this is where Freelancers cut a bit loose. Such people need not be employees or workers, and this type of income protection insurance is also known as occupational disability insurance, and it ensures monetary compensation against occupational impairment. A portion of your income can be replaced through this insurance as well thus making it possible to pay bills and other expenses even while physically unwell and recovering from an injury.
Key Benefits of Income Protection Insurance:
- Replaces income if you are sick or suffering injury and hence are unable to work.
- Couples with disability while ensuring normalcy in living standards.
- Ensures payment for essential expenses such as landlord, energy supplier, and groceries.
- For freelancers in particular who are the earning members of their families, this type of insurance is especially beneficial in case a medical situation arises
8. Business Interruption Insurance: Aiming at Revenue Loss Restoration
Business interruption insurance is intended to cover your freelance business in case there are unforeseen interruptions such as a natural disaster, and fire or any other activity which renders you incapable of doing business for some time. This policy covers all amounts that could have been realized in respect of loss of income and net relevant operating costs during the time the business is incapacitated.
Key Benefits of Business Interruption Insurance:
- Provides income that has been lost as a result of the interruption of business activity.
- Relieves the economic hardships brought on by business closure such as rental expenses, payroll, taxes and other running costs.
- Can be offered as benefit an endorsement on business general insurance.
- As these freelancers are highly vulnerable, as they depend on almost assured income, business interruption insurance is of utmost importance.
What is the Cost of Business Insurance for the Freelancers?
To cover their risks, freelance professionals need business insurance. Many factors will come into play to establish how much you may need to pay for the insurance, including the type of insurance to be taken, the area of business specialization and the extent of risks to be covered. On average, a freelancer would spend anything between $200 and $2,000 in a given year depending on the policy and cover limits.
Factors Affecting the Cost of Freelance Business Insurance:
- Need and the type of insurance (general liability, professional liability, cyber liability)
- The specific risks that are inherent in your industry.
- The size of the staff and number of contractors
- The amount and type of business assets owned
- Location related factors and the policies of insurance in that area
It’s significant to look at several insurance providers when searching for appropriate coverage to suit your needs, as prices may differ greatly.
Conclusion
It is important for every freelancer to obtain a proper insurer so as to safeguard against any unforeseen circumstances that may occur in their business. This is important for both beginners as well as those who have been in freelancing for long. Ideally, the right insurance should cover almost all possible risks concerning freelance work like, general liability or cyber risks for the freelancers to be unabated and be able to dedicate themselves to business expansion and clients catering undoubtedly.
Also, keep in mind that this is not one size fits all because every freelance business is different so too the nature of its clientele and the services performed therefore it is important to seek the counsel of the licensed professional to do such a task.
Most importantly, clients seeking your service should know that their freelance business is safe and therefore be prepared to focus on what they do best which is interacting with clients and nurturing the career.
