If you’ve ever been faced with hefty medical bills, then you’re probably aware of how much of a difference health insurance can make to softening the financial blow. While your small freelancing business probably won’t end up in the ER with a broken wrist, good insurance is still necessary to keep it well protected.
As a freelancer, you know that every penny you make counts. You may view business insurance for freelancers as an unnecessary cost since it covers incidents that may or may not happen––but just because you don’t need it right now doesn’t mean it’s not incredibly important.
What Is Business Insurance?
Before getting into the nitty gritty of what business insurance is, it’s important to appreciate that freelancing is a business.
It’s easy to just see yourself as an individual picking up projects with no official name or paperwork. However, recognizing yourself as a business is a crucial step to gaining the credibility and documentation you need to be financially and legally protected. It’s much better to have a client sue your insured business than sue you directly.
Running a business comes with various risks, especially when you’re managing a small business where a tiny mishap can completely alter your next few months. Business insurance is a straightforward solution to staying well protected.
Typically, business insurance covers the loss of some or all of your income due to a specific type of disaster. However, it isn’t just for accidents and mishaps. As a freelancer, business insurance can also protect you when a client holds you liable for their own losses and damages. Note that you should look into business insurance even if you already have a surety bond, as business insurance isn’t the same as surety bonds.
Why You Need Insurance as a Freelancer
At this point, you may be thinking “Well, I still don’t think I need insurance. It’s not like I’m rolling in independent income.”
This is where you’re wrong. Insurance doesn’t just protect your business earnings. It also protects your personal savings from expenses that others might hold you liable for.
Freelancing is already inconsistent by nature. The ups and downs in revenue, clients enthusiastically asking for more work and then changing their mind later, and the rising costs of materials and services can all make working on your own stressful and unpredictable. The last thing you need is a huge bill that robs you of all your profits.
Do You Still Need Business Insurance If You Have Home Insurance?
Some freelancers and small-business owners are under the impression that they don’t need a business insurance policy because their home insurance already provides all the coverage they need.
Unfortunately, this isn’t true. Although homeowners insurance covers your personal property, it generally excludes any property that you use for business-related purposes (including any furniture or equipment you keep in your home office, if you have one). The same applies to renters insurance.
The truth is that home insurance policies just aren’t meant to cover the equipment you use for work or to protect you from work-related lawsuits. This is why business insurance exists.
3 Types of Business Insurance You May Need
There are three main types of business insurance you may want to consider getting.
1. Liability Insurance
There are two types of liability insurance: general and professional.
General liability insurance
General liability insurance protects your business from costs related to damage to someone else or their property. This protection is only financial, not legal, so you still need to ensure you’re following relevant laws and have a lawyer ready to help you if you run into legal trouble.
Whether a client slips in your office or you accidentally damage a piece of their equipment, liability insurance has got your back. The insurance may cover medical bills or the cost of repairing or replacing damaged equipment.
The best part is you don’t even need to be running a warehouse or office to take advantage of liability insurance. It’s also great for people who work from home!
General liability insurance also covers advertising and trademark injuries, which takes some pressure off if you’re worried about making small mistakes here and there.
Professional liability insurance
Unlike general liability insurance, professional liability insurance covers claims and legal bills related to personal injury or property damage. It’s great for sparing you the cost of slipups that lead to legal claims. Even if you can’t be perfect, you can take steps to protect yourself from the repercussions of these all-too-human accidents.
Every business should have professional liability insurance, regardless of its size. Lawsuit fees and claims are no joke, and they can run a business into the ground. You can get professional liability insurance for less than $50 a month, which is well worth it for the coverage you get. Make sure to sign up for a policy before it’s too late and you already desperately need it!
2. Personal Insurance
Personal insurance is great for freelancers because you aren’t just a business––you’re also an individual. While you may do most of your work under an LLC, you could also find yourself working on projects under your own name.
Health insurance, life insurance, disability insurance, and all the other types of insurance needed to go about your daily life fall under the category of personal insurance.
As an independent freelancer, you don’t have all the benefits that come with a traditional job. YOU are your biggest asset, and you must protect yourself at all costs.
There are companies that specialize in freelancer insurance, which may be worth looking into. Take some time to shop around and make sure you’re getting the best deal so that you can stay protected without breaking the bank.
3. Business Interruption Insurance
Have you ever had a mishap that made it practically impossible to work? Maybe your computer got stolen or the small pop-up you invested in got vandalized. This is exactly the type of situation where business interruption insurance comes most in handy.
During periods when you unexpectedly need to halt your freelance operations, business interruption insurance can help you cover the following costs:
- Lease payments
- Loan payments
- Loss of income
- Relocation expenses
Business interruptions are never welcome, but that doesn’t mean you shouldn’t be ready for them. In fact, business interruption insurance is ideal for freelancers because it’s most suited to jobs with a high level of inconsistency or unpredictability.
How to Choose a Business Insurance Policy
So, how do you pick an insurance that’s right for you?
1. Review your finances
To start, you’ll need to look at your revenue. Business insurance can be expensive, and you need to make sure you choose a cost-effective insurance policy you can afford.
If you have a particularly big or profitable freelancing business, you’ll probably need more comprehensive insurance. As your business grows, it’s a good idea to reevaluate your numbers every year to make sure your insurance policy is still giving you enough coverage.
2. Figure out the type of coverage you need
You also need to consider the type of business you’re running. If you work with a lot of third-party clients, especially in person, then general insurance and liability insurance are must-haves.
We recommend seeing if you can find a package insurance deal to help cover all these concerns for a fairly reasonable price.
3. Shop around
There are a ton of companies out there that offer business insurance, and many try to stand out from the crowd by offering unique coverage options that may be better suited to a certain type of business. Fully explore the market before settling on a policy to ensure that you’re getting the best deal.
Once you’ve found an insurer you like, be sure to read the fine print of your chosen policy before committing to the deal so that you have a really good idea of what you’re signing up for.
Is all this sounding a little too expensive or overwhelming? As a small freelancer, you also have the option to simply add certain policies to your pre-existing personal insurance. This shouldn’t be as pricey but will provide some sort of protection.
The Bottom Line
Insurance is important! Whether it’s a typical day or you’ve just signed the biggest deal of your freelancing career, being financially protected from all the potential costs you could face if anything goes wrong is essential.
While accidents are unlikely, even a small one could completely disrupt the life you’ve worked so hard for. Start with an affordable policy that covers the basics, then work your way up as your revenue increases.
You’ll thank yourself later if a client sues you or a disaster stops you from being able to work!