Freelancing is on the rise, with more professionals than ever opting for self-employment versus taking a spot on someone’s payroll. If you’re a freelancer, you’re essentially a small business owner, whether or not you employ someone else. Small business owners need various types of insurance, including liability coverage for themselves both personally and professionally.
Professional Liability Insurance for Freelancers
As a business owner, you can be sued, with litigants going after both your professional and personal assets. Forming a limited liability company can help separate your personal assets from your business, but you can still be wiped out by legal fees. Here are the most popular types of professional liability insurance policies for freelancers.
- Errors and omissions: Nobody’s perfect. In the course of doing business, you’ll inevitably make a mistake. Errors and omissions insurance protects you against lawsuits due to those mistakes. It’s often most recommended for service-based businesses like those in accounting, real estate and wedding planning. Even if you never need it, knowing you have it will provide peace of mind.
- Libel and slander: Yes, you can be sued for your words. All freelancers could eventually need insurance that protects against defamatory words you said or wrote about another person or organization.
- Professional malpractice: Medical and legal professionals are often advised to purchase malpractice insurance. If you’re going out on your own in an industry that tends to attract lawsuits, consider malpractice insurance to protect against potential perceived business liabilities.
Some business owners and freelancers opt to go with a type of insurance coverage designed to cover all of the above. This is known as general liability insurance. If you go this route, though, be aware of the coverage limits and make sure you’ll be protected if any of the above happens.
Read More: Third Party Liability Insurance Definition
Property Protection Insurance
Any business requires equipment and supplies. If you’re self-employed, take an inventory of everything you own and ask what would happen if your severe property damage and your property was suddenly wiped out by a natural disaster, act of vandalism or fire. Yes, you probably have renters or homeowners insurance, but there could be limitations on how much that insurance will cover your business property.
Property protection is a type of business insurance designed to cover the furniture, equipment, inventory, documents and tools that you use in the course of doing business. This type of insurance also will cover your business-related property if it gets damaged while away from your home. If you travel with your laptop or rent an office, it’s especially important you have this type of coverage in place.
Business Interruption Insurance
Your business assets aren’t the only thing to worry about if something happens to your property. You’ll likely experience at least a small disruption in daily activities. Business interruption insurance helps pay the cost of that lost income.
Before you sign a business interruption insurance policy, though, scrutinize it carefully. This type of insurance doesn’t cover loss of income due to flooding, and most policies will only cover you for up to 30 days of loss. You’ll also have to wait at least a day or two before the coverage will become effective.
Health Insurance for Freelancers
One unfortunate aspect of being a freelancer is that you don’t have the benefits that salaried employees often get. That includes health insurance. Here are some healthcare coverage options for the self-employed.
- Spouse’s insurance: If this option is available to you, it likely will be the best deal. Some policies will also allow employees to add unmarried partners who live in the same home.
- Parent’s insurance: If you’re under the age of 26, you may qualify for young adult coverage under a parent’s plan, even if you no longer live with that parent.
- Healthcare.gov: The Affordable Care Act now lets self-employed individuals enroll in healthcare coverage. You may even qualify for premium tax credits or Medicaid. Visit Healthcare.gov to enroll.
- Trade organizations: Some professional trade organizations offer group discounts for members. The Freelancers Union is a great first place to check.
- Out-of-pocket: If you’re young and relatively healthy, you could pay your medical expenses yourself. However, it’s important to at least have a high-deductible plan in case you have a serious illness or injury.
Read More: Health Insurance Basics
Auto Insurance for Freelancers
Of course, you’ll need auto insurance no matter what, but as a freelancer, there are some extra considerations. If you drive your car for work, you’ll need to make sure your policy covers business use. You’ll also need to keep this consideration in mind if you subcontract work to someone who has to use a personal vehicle to conduct business.
There’s also the fact that occupation plays a role in the rates you’re quoted. As a freelancer, your occupation might be seen as a higher risk since your income could fluctuate, leaving you unable to make payments. Shop multiple providers, comparing quotes with the same deductible and coverage options to make sure you’re getting the best rate available.
Read More: Affordable Car Insurance: Best Options Per Category
Employee and Contractor Protection
If you plan to add an employee to your team, there are some business owner's policy decisions to make. You’re going from a solopreneurship to a small business, and any startup needs insurance for employees. In fact, your local laws might even require you to have workers compensation insurance for business.
With workers compensation insurance, your business is protected if one of your employees is injured on the job. In most states, you’ll be able to buy workers compensation insurance through an insurance company, but some require you to buy it from a specific source. Check with your state’s department of labor for the requirements that apply to you.
Personal Protection Against Disability
As a freelancer, your health is your most valuable asset. Disability insurance will cover you if you become unable to work. There are two types of disability insurance, short-term and long-term disability.
With short-term disability, you’ll have coverage for a short period. Typically, this is three months, six months or a year, depending on the details in your policy. Long-term disability will cover you for years, although the longer your policy coverage, the more you’ll pay in premiums. Make sure you carefully scrutinize the limitations and requirements of any policy before you sign on the dotted line.
Life Insurance for Freelancers
The need for life insurance isn’t unique to freelancers. One big difference is that some employees are provided a certain amount of life insurance as a job benefit. You won’t have that, so you’ll have to shop for a policy on your own. If your spouse has life insurance through an employer, you might be eligible for a small benefit as well, but it’s important to compare the cost to what you can get from a private insurer.
Many life insurance companies require a medical exam before issuing a policy, but in some cases, a practitioner will come to your home. You can also find life insurance policies that are quoted using data you enter about your lifestyle and habits, although you might not get the deal you would if you had good exam results.
Entrepreneurship comes with many rewards, whether you own a business or you’re a freelancer. But it’s important to make sure both your business and personal assets are protected against legal action or unexpected loss. With the right coverage in place, you can enjoy the thrill of working for yourself while minimizing worry.
- SHRM: How the Coronavirus Has Changed Freelancing
- Insurance Information Institute: Insuring Your Business: Small Business Owners' Guide to Insurance
- Insurance Information Institute: Professional Liability Insurance
- Insurance Information Institute: Do I Need Business Interruption Insurance?
- HHS.gov: Young Adult Coverage
- Healthcare.gov: Health Coverage if You're Self-Employed
- Freelancers Union: Insurance for Freelancers
Stephanie Faris has written about finance for entrepreneurs and marketing firms since 2013. She spent nearly a year as a ghostwriter for a credit card processing service and has ghostwritten about finance for numerous marketing firms and entrepreneurs. Her work has appeared on The Motley Fool, MoneyGeek, Ecommerce Insiders, GoBankingRates, and ThriveBy30.