Why it pays to protect your self-owned business
Key takeaways:
- Commercial insurance can protect your freelance business and financial future.
- General liability protects you from lawsuits if someone is injured on your property.
- Professional liability protects you from lawsuits related to customer complaints, mistakes, and negligence.
- Cyber liability protects you in case of a hack that affects customers’ identification and financial information.
- Business interruption covers your expenses if you have to close due to a natural disaster, vandalism, or theft.
- Commercial auto provides coverage if you use a vehicle for business purposes.
- Commercial property will help you repair or replace damaged/lost/stolen equipment, computers, furniture, etc.
- Health insurance is required in some states so you may need an individual policy or COBRA insurance.
The number of freelancers has been growing in recent years. There are 57 million Americans that freelance as of 2019, who represent 35% of the U.S. workforce.
Freelancers, or independent contractors, essentially are micro business owners, even if they are not an LLC. Self-employment gives you more freedom to create your own schedule and take on projects that you’re passionate about. There is an important aspect that many freelancers haven’t considered, however: commercial insurance.
Commercial insurance is essential for business owners, but do you need it if you’re a freelancer? It’s an important question and one you should understand if you want to protect your business and financial future.
What insurance should freelancers consider? We look at seven policies you should look into.
1. General liability
General liability provides protection in case someone is injured on your property or their belongings are damaged. Even if you work at home, you may need this type of policy, especially if clients visit.
General liability also guards against advertising injuries, such as:
- Libel
- Slander
- Trademark/copyright infringement
It will protect you if you say or post anything negative about a client or competitor or if you’re accused of using copyrighted material such as images or logos.
2. Professional liability
If you provide professional services, there is a chance you could be sued by a client. Some industries are at higher risk of facing lawsuits, such as doctors, lawyers, architects, and plumbers/electricians. Professional liability (also called errors and omissions or E&O insurance) is designed to protect you from such lawsuits.
E&O protects against claims, including:
- Delivering late or incomplete work
- Mistakes in your work
- Negligence
3. Cyber liability
Cybercrime is a huge problem for every size business, including freelancers. If part of your business is performed online – or if you store sensitive customer or client information – that data could be stolen and used to commit fraud and other financial crimes. If investigators trace the breach back to your computer, you could be held liable for damages or even legal action.
Cyber liability insurance protects you in the case of a data breach. Such policies can help pay for:
- Notifying customers/clients
- Forensic services to determine how the data was stolen
- Legal services & steps taken for regulatory compliance
- Customer credit and fraud monitoring services
- Business interruption
4. Business interruption
Freelancers don’t usually get paid if their businesses are interrupted by unforeseen circumstances, such as riots, vandalism, theft, fire, and some natural disasters, unlike full-time employees with benefits. If your business is forced to shut down, this type of policy can help cover some of your expenses and costs, including:
- Lost income
- Taxes
- Relocation expenses
- Lease/rental payments
Be sure to check the policy details to see what incidents are covered. For example, some policies will not cover interruptions due to flooding if you live in a flood zone. You would need a separate policy for that.
5. Commercial auto
You may need a commercial auto policy if your business requires you to be on the road a lot. It’s important to know what your auto policy covers, especially if you use your vehicle for business purposes.
6. Commercial property
What happens if you work at home and your computer, equipment, or office furniture gets damaged? How will you replace it? Your personal homeowners’ policy might pay to repair or replace your property, but what if it doesn’t? In that case, commercial property insurance could be essential.
Another option is to buy a business owner’s policy (BOP), which combines general liability and commercial property.
7. Health and disability
A few states enforce Affordable Care Act individual mandates that require residents to have health insurance. This can pose challenges for freelancers. Full-time employees generally get health insurance through their employer or a spouse’s policy. As a freelancer, you will have to buy an individual plan or purchase COBRA insurance.
Disability insurance is often provided by employers, as well. Freelancers can purchase individual disability insurance, which will cover at least part of your income if you are sick or injured and unable to work.
Insurance considerations for your freelance business
What types of business insurance do you need? The answer depends on your particular industry and business. Do you rent space or work at home? Do clients stop by your place of business/home? Do you store credit card numbers or other personal data of customers on a server?
If you have questions about business insurance, contact Avante Insurance and we’ll consult with you. We will ensure you have the right coverage to protect your freelance enterprise.
This blog and website are made available by the publisher for educational and informational purposes only. It is not to be used as a substitute for competent insurance, legal, or tax advice from a licensed professional in your state.