The Ultimate Guide to Business Insurance for Freelancers

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As a small business owner, purchasing insurance can be essential to protecting your operation from financial claims or lawsuits. When you first start your business, it is important to get the required licenses and register for an EIN. You might feel your business is too small for insurance if you are a contractor or freelancer.

The truth is, although there are a number of differences between freelancers, contractors, and more traditional forms of self-employment–small business insurance can still protect you from the risks associated with running a business, regardless of the size of your operation.

So, what does business insurance for freelancers look like? This is the question we’re trying to answer. This guide will help you understand the key policies that freelancers need to be aware of (and what they include) when searching for business insurance. We will also talk about the typical costs and which providers are best to help you find the right coverage for your contracting or freelance business.

Top types of business insurance for freelancers

Although as a freelancer, you likely don’t own a brick-and-mortar location or work with an extensive team, you can still benefit from business insurance. Business insurance protects you against financial, legal or other claims in the event of an accident, lawsuit or disaster.

For example, imagine you’re a freelance handyman: What happens if a TV you installed falls and injures your customer? What happens if your computer crashes and you lose all your work? These types of unplanned situations can be covered by freelancer insurance.

This being said, although some of the types of insurance–business liability insurance, for instance–will be the same types of policies that any traditional business owner should consider, there are also specific policy options that will be more important and unique to freelancers.

1. General liability insurance

First and foremost, this is one of the most important insurance policies for freelancers and all small business owners alike. General liability insurance protects against common workplace accidents, including property damage and injuries involving third parties. Even people who work remotely can benefit from this type business insurance.

For example, say a delivery person slips and is injured while dropping off toner to a home office. General liability policies can cover the medical expenses of delivery personnel. Your general liability policy can also pay for medical bills for a delivery person.

Moreover, and particularly noteworthy for many freelance professionals, this policy also guards against advertising injuries, which include:

  • Libel

  • Slander

  • Trademark and copyright infringement

This type of policy, therefore, can legally cover freelancers if they say or write a negative comment about a competitor, or if they’re accused of using someone else’s copyrighted material, like photographs, without permission.

2. Professional liability insurance

Whereas general liability protects against claims of property damage or personal injury, professional liability insurance can help cover legal bills for lawsuits and claims related to professional services. Professional liability insurance is a type that freelancers should consider.

For instance, professional liability insurance can pay legal expenses for an architect accused of cost overruns due to missed deadlines or a plumber whose failure to repair a pipe resulted in water damage.

Overall, this policy, also known as errors and omissions insurance, covers freelancers accused of making a professional error, including:

  • Delivering work that’s late or incomplete

  • Making a mistake

  • Being negligent in performing their work

This being said then, if you, as a freelancer or contractor, are sued over the quality of your professional services, this policy can cover the costs to hire a lawyer and also pay for any judgments in which you’re found liable.

3. Cyber liability insurance

Next, you might look into cyber liability insurance as one of the top types of business insurance for freelancers. Many freelancers and professionals work online, so the risk of data breaches is a major concern.

As you might imagine, data breaches are not only disruptive but can also be extremely expensive. According to a report by internet security firm, Kaspersky Labs, the average cost of a small business data breach is $86,500. Cyber liability insurance can be a great protection, but if you don’t have it, your finances could be wiped out.

This being said, if you’re a freelancer who stores sensitive customer data, like credit card numbers, you could very likely benefit from cyber liability coverage. In the event of a breach, this freelancer business insurance policy can help pay for:

  • Notifying affected customers

  • Forensic services to determine how the breach occurred

  • Legal services to ensure regulatory compliance

  • Customer credit and fraud monitoring services

  • Business interruption expenses

Although anyone can be the victim of a cyberattack, freelancers who work in occupations such as health care and financial services are more likely to be targeted.

4. Business interruption insurance

This type of business insurance for freelancers can be particularly important if an unexpected event occurs that prevents you from doing business. Business interruption insurance typically covers vandalism, theft, and riots.

However, not all natural disasters are covered under this type of policy, so if your freelance business is located in an area prone to flooding, you might need a separate policy.

Nevertheless, this insurance could help you cover the costs of:

  • Lost income

  • Taxes

  • Relocation

  • Lease payments

Although business interruption insurance may not be the most important policy for you to consider as a freelancer, it’s certainly worth looking into depending on your specific industry, circumstances, and location. If you’re a full-time freelancer, for example, this type of insurance may be particularly worthwhile.

5. Personal insurance

Finally, although technically not business insurance for freelancers, it’s important to remember that as a freelancer, you should invest in insurance to protect yourself as an individual as well. Personal policies may not be necessary if you have insurance from your primary company and are running a side business. You’ll need to ensure that your personal policies are up-to-date if you work full time as a freelancer.

Some of the policies you may want to think about include:

  • Life insurance

  • Health insurance

  • Disability insurance

  • Home, auto, and renters insurance

In fact, with the growing number of freelance professionals working today, there are now companies that specialize in personal freelancer insurance. Additionally, professional organizations like the Freelancers Union can help you learn more about navigating personal insurance–including what kinds of policies you need and where to get them.

Other types of business insurance for freelancers

Overall, these five types of insurance will very likely be the top policies you’ll want to consider when you’re looking for business insurance for freelancers. This being said, however, depending on the specifics of your business and what you do, there are other policies you may want to think about as well, including:

  • Commercial auto insurance: If you drive your car for your freelance business, commercial auto insurance can protect you in the case of an accident or damage to your vehicle.

  • Rideshare insurance: This type of business insurance for freelancers is specific to those who drive for rideshare companies. Riders can get liability and damage coverage through rideshare insurance. This covers both their personal auto insurance as well as the rideshare company’s.

  • Commercial property insurance: Commercial property insurance can help protect the investment you make in your business by covering equipment–including computers, tools, and office furniture. You might consider a BOP (business owner’s policy) if you feel you may need commercial property insurance. This policy combines general liability with commercial property coverage, at a cost that is usually lower than if they were purchased separately.

  • Special event insurance: There are two types of special event insurance that may be applicable for freelancers. Special event insurance is available for organizers of events to cover them against legal claims for bodily injury or property damage. There is also special event insurance that protects workers who work at events such as caterers, professional photographers, security personnel, etc. from any liability arising out of their work.

  • Intellectual property insurance: As a freelancer, you might agree to give up your intellectual property rights as part of a contract with your client. If you are a contractor or freelancer who wishes to protect your trademarks, patents or copyrighted materials, you may consider investing in intellectual property insurance. This type of insurance is more beneficial for inventors, designers, and other freelance professionals.

How much does business insurance for freelancers cost?

As a freelancer or contractor, you’re very likely operating on a tight budget–especially if you have a simple side hustle and are not freelancing full-time. You might be curious about the cost of business insurance for freelancers. You may find your insurance costs to be lower depending on the type of contract or freelance business you own. In general, a freelancer designer is less likely to have an accident than a restaurant owner.

This being said, however, when it comes down to it, the cost of your freelancer business insurance will depend on a number of factors such as what you do, your industry, your time in business, and more. You will pay more for multiple policies that provide extensive coverage than someone who needs only one policy. For a point of reference, according to the insurance company Pogo, on average, freelancers and self-employed professionals pay $400 per year for general liability insurance.

Once again, depending on the policies you need, a great way to save money on business insurance as a freelancer (or any business owner) is to purchase a customizable business owner’s policy. BOPs usually include general liability, commercial property, and business interruption insurance. However, depending on your provider, you might be able to add other types of policies.

Generally, as a freelancer, you very likely won’t need a higher coverage amount or a significant number of policies. To keep your costs down, it’s a good idea to find a provider who has experience with freelancer business insurance. They can help you choose the right coverage for you and your budget.

Where to get freelancer business insurance

So, if you think you need business insurance for your freelance operation, you’ll want to think about what type of policies you need, how much coverage you need, and of course, where to go to actually get your business insurance. As with other business products, there is a wide range of providers that can help you find the right insurance for you as a contractor or freelancer.

As we mentioned above, there are also certain providers who work more specifically with freelancers and, therefore, may be more helpful in finding you the coverage and policies that will work best for you. In particular, you might consider:

Hiscox

Hiscox is a well-known, top-rated insurance company that can provide all types of policies–everything from general liability insurance to more specific policies like commercial crime insurance. Hiscox makes it easy to get a quote for your business and then purchase a policy online based on that quote.

Although Hiscox works with all different types of businesses, they’re a particularly great option for business owners who need policies that are specific to their industry–especially designers, marketers, and other media professionals, architects, landscapers, and contractors, as well as IT and tech professionals.

As Hiscox works with many freelancers, contractors, and similarly self-employed professionals, their policies and agents are well-suited to meet the insurance needs of these types of business owners.

Next Insurance

Similar to Hiscox, Next Insurance is not only designed for different types of business owners, but also for those who want to browse and purchase insurance policies in the easiest way possible. Next allows you to complete all of your insurance purchase online while still receiving personalized attention and assistance from their insurance professionals.

Next Insurance focuses on a handful of policies, including general liability, professional liability, and commercial auto, in other words, some of the policies that most freelancers should be looking for first. Next Insurance works with contractors and freelancers in many industries like beauty, fitness and education.

Furthermore, as an online-focused company, Next allows you to manage all of your policies online, including accessing free certificates of coverage (which are particularly important if a client needs to see proof of insurance), adding additional insureds, and accessing support and filing a claim.

Thimble

Finally, if you’re a freelancer who doesn’t want to commit to an annual insurance policy, you may want to work with Thimble. Thimble offers general liability insurance for contractors and freelancers who require policies that are based on their work hours. Thimble, unlike other insurance companies, offers insurance policies that are hourly, daily or monthly. If you are a photographer and only need insurance for one day, there is no need to purchase an annual policy you will not be using.

With Thimble, you can input your basic information and receive a bindable quote in just minutes–online or by using their mobile app. After you have reviewed the quote, it is possible to purchase a policy and receive all the information online. You can also add crew members and additional insureds and even send certificates of insurance at no additional cost. Thimble offers professional liability insurance, but most of their coverage is general liability.

Ultimately, if you’re looking for a business insurance provider that’s designed specifically to accommodate freelancers and contractors (and their schedules), Thimble will be one of your top choices.

The bottom line

At the end of the day, if you’re a freelancer, business insurance may not be top of mind as you’re starting and managing your operations. However, investing in business insurance now can help save your business from unexpected costs or claims in the future. The right insurance coverage is essential for your success, no matter if your side hustle is full-time or if your business is just beginning.

Ultimately, however, the exact types of freelancer insurance you need will depend on the specifics of your business. To ensure you get the right policy and the best value for your money, you should work with an experienced business insurance company who has worked in the freelance market.

Additionally, if you’re not sure what risks you may face as a freelancer or what insurance you might need to meet contractual requirements, you always have the option to consult with a business attorney–these professionals can answer any questions you have and ensure you’re doing everything in your power to mitigate your risks effectively.

This article originally appeared on Fundera, a subsidiary of NerdWallet.

NerdWallet, https://www.nerdwallet.com/article/small-business/insurance-policies-for-freelancers
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