You have to cover yourself and your business
Six key insurance policies for the self-employed:
- General liability
- Professional liability
- Cyber liability
- Business interruption
- Commercial property
- Health and disability insurance
Going into business for yourself takes dedication and drive. Being self-employed isn’t for everyone but the U.S. Bureau of Labor Statistics estimates that around 9.6 million people have jumped into the deep end. That number is expected to increase to 10.3 million by 2026.
If you’re thinking of taking the leap, you have many things to consider. For instance, you need to think about buying commercial insurance. What kinds of policies do you need?
We review six suggestions that you should strongly consider.
1. General liability
General liability is designed to protect you in case anyone is injured on your property. It will also cover damage to someone else’s property. Even if you work at home, it’s possible you might need this type of protection, especially if clients ever visit you in person.
General liability also covers something called advertising injuries, which include:
- Libel
- Slander
- Privacy rights violations
- Plagiarism
- Copyright infringement (using a trademarked logo, slogan, or image, etc.)
2. Professional liability
If your business provides professional services such as IT services, website design, advertising/marketing, accounting/CPA, attorneys, or plumbing/electricians, there’s always a chance you could get sued by a client. Professional liability (often called Errors & Omissions (E&O) insurance) can protect you financially if a client is harmed by a service you provide or the advice you give.
Professional liability protects against claims, including:
- Late or incomplete work
- Mistakes in work
- Negligence on your part
3. Cyber liability
Cybercrime should be a concern for every business owner even if you’re a one-person show. If your business model includes storing private/sensitive customer or client information, then you should buy cyber liability insurance. If your computer or system ever gets hacked, that data could be used to commit fraud, open lines of credit, or other financial crimes. You could then be held liable for damages and even face legal action.
Cyberattacks are growing fast and roughly half are committed on small businesses. These attacks cost small businesses an average of $200,000 to recuperate losses. They are relatively easy to implement too and can be going on without you even knowing it. They can stem from phishing emails, downloads from websites and social media, and employees/outside users with access to computer networks.
A cyber liability policy covers:
- Notifying customers/clients of a breach
- Forensic services and investigations
- Legal services
- Customer credit and fraud monitoring services
- Business interruption
4. Business interruption
If you work for yourself, it’s unlikely you’ll get paid if you can’t work. Unfortunately, things do happen that can temporarily shut you down, such as fire, theft, vandalism, or natural disasters like hurricanes or flooding. Business interruption insurance helps replace income due to the temporary closure of your business from a covered loss, like property damage.
A Business Owner’s Policy (BOP) can bundle business interruption insurance with policies like commercial property insurance, general liability insurance, and data breach insurance.
Business interruption protection covers:
- Lost income
- Taxes
- Relocation expenses
- Lease, mortgage, or rental payments
- Loan payments
- Payroll
- Extra expenses like rental space to temporarily run your business
- Training costs
5. Commercial property
Even if you work at home, you might need commercial property insurance. A commercial property insurance policy can help you repair or replace things like your computer, office equipment, or furniture if it gets damaged. In some cases, your homeowner’s policy may cover these things but check your policy, as there may be rules regarding property that’s used for business purposes.
When you have commercial property insurance, you’ll get help replacing your things or repairing a damaged building (like your house) after a covered event such as a burst water pipe, fire, or theft. As mentioned earlier, you can also look into combining general liability and commercial property under a BOP.
6. Health insurance and disability
Health insurance coverage is no longer mandated by the federal government but some states may still require Americans to have health insurance to avoid a tax penalty. Many people get health insurance through their employer but as a self-employed individual, you skip this benefit.
Having health insurance is important for several reasons. You never know when you could have an accident and get hurt or be struck by an illness that could lead to very expensive medical bills. If you’re self-employed, some options for getting health insurance include:
- Get coverage through your spouse’s employer
- Buy an individual health plan on the open market
- Buy a plan through the government-sponsored health insurance marketplace
You may also want to consider buying disability insurance in case you get sick or injured and can’t work for an extended period. Self-employed individuals can buy also disability insurance to cover at least part of their income.
Take care of your self-employment insurance needs
Being a one-person show means you are in charge of overseeing everything, including your commercial insurance needs. The types of insurance you need may depend on your particular industry or type of business. It may also depend on whether you work from home or lease a space, whether you see clients face-to-face, and whether you store the private data of customers or clients.
If you have questions about business insurance for a self-employed individual, contact us. 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.