The Ultimate Guide to Business Insurance for Freelancers
Even businesses of one need insurance.
NerdWalletAugust 4, 2020
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As a small-business owner, purchasing insurance can be essential to protecting your operation from financial claims or lawsuits. In fact, along with getting the necessary licenses and setting up a bank account, finding the right insurance should be one of your top priorities when you're first starting your business. If you're a freelancer or contractor, however, you might think your business is too small to need insurance.
The truth is, although there are a number of differences between freelancers, contractors and more traditional forms of self-employment, business insurance can still protect you from the risks associated with running a business — regardless of the size of your operation.
In this guide, we'll break down some of the most important policies you'll want to consider (and what they cover) when looking for business insurance for freelancers. We'll also discuss typical costs, as well as some top providers you can work with to find the right insurance for your freelance or contracting 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. After all, on the whole, business insurance can protect you from financial, legal or other claims in the case of an accident, lawsuit, disaster or other unexpected occurrences.
For example, imagine you're a freelance handyman: What happens if a TV you installed falls and injures your customer? In the same vein, what happens if you're a freelance designer and your computer breaks and you lose all of your work for a client? Business insurance for freelancers can protect you in these types of unexpected situations.
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.
This is one of the most important insurance policies for freelancers and all small-business owners alike. General liability insurance can protect against common accidents in the workplace, such as property damage or injuries involving a third party — even people who work from home can benefit from this type of business insurance.
For example, say a delivery person slips and is injured while dropping off toner to a home office. A general liability policy can pay for the delivery person's medical bills. Similarly, if you're a web designer who spills coffee on a client's laptop during a presentation, your general liability insurance can pay for the repair or replacement of the damaged laptop.
Moreover, and particularly noteworthy for many freelance professionals, this policy also guards against advertising injuries, which include:
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.
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. In this way, professional liability insurance is certainly a type of business insurance that many freelancers should look into.
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.
If you're 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.
For many freelancers, as well as other professionals, much of your work is often performed and managed online — meaning one of the greatest risks you might face in the course of business is the threat of a data breach.
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. Therefore, without the protection offered by cybersecurity insurance, a breach has the potential to wipe out your finances.
This being said, if you're a freelancer who stores sensitive customer data, like credit card numbers, you could very likely benefit from cybersecurity insurance 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.
Business interruption insurance
Business interruption insurance can be particularly important if an unexpected event occurs that prevents you from doing business. For example, instances like riots, theft and vandalism are typically covered under business interruption insurance.
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:
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.
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. If you're running a side hustle and have insurance from your primary employer, you may not have to worry about personal policies. On the other hand, if you're a full-time freelancer, you'll want to make sure that you have all of the policies you need to protect yourself and your family.
Some of the policies you may want to think about include:
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.
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. Rideshare insurance can provide liability and damage coverage for drivers, covering the gaps in their personal auto insurance and that from the rideshare companies themselves.
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. If you think you need commercial property insurance, you might decide to look into a business owners policy, or BOP, which combines general liability and commercial property coverage at a price that is typically lower than if the policies were bought separately.
Special event insurance: There are two types of special event insurance that may be applicable for freelancers. First, there is special event insurance for organizers who hold events, to protect them from legal claims of property damage or bodily injury. On the other hand, there is also special event insurance for workers at events, like professional photographers, caterers and security personnel to protect them from liability claims as a result of their work at an event.
Intellectual property insurance: As a freelancer, you might agree to give up your intellectual property rights as part of a contract with your client. However, if you are a freelancer or contractor who wants to protect your rights to trademarks, patents or copyrighted material you create, you might invest in intellectual property insurance. Specifically, this type of business insurance may be more worthwhile for designers, inventors and other similar 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. With this in mind then, you may be wondering how much business insurance for freelancers costs. Luckily, depending on what kind of freelance or contract business you run, you may find that your insurance costs are lower than those of many other small-business owners — in general, a freelance designer probably poses less risk in comparison with 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. Plus, if you require multiple policies with expansive coverage, your costs will likely be higher than someone who only needs a single policy with adequate coverage. 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.
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. Although BOPs typically bundle general liability insurance, commercial property insurance and business interruption insurance, you may be able to include other types of policies as well — depending on the provider you're working with.
Generally, as a freelancer, you very likely won't need a higher coverage amount or a significant number of policies. Therefore, to keep your costs low, you may want to look for a provider with experience in business insurance for freelancers who can help you find coverage that meets your specific needs and budget.
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. Ultimately, just as is the case with many other business products, there are a number of providers who can help you find the insurance you need as a freelancer or contractor.
What's the best fit for your business?
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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 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. With Hiscox, you can receive a business insurance quote quickly and easily online, as well as purchase a policy based on the quote you receive.
Although Hiscox works with all different types of businesses, it's 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, its policies and agents are well-suited to meet the insurance needs of these types of business owners.
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. With Next, you can complete the entirety of your insurance-buying process online and still receive personalized assistance and attention 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, like Hiscox, works with many freelance and contractor-specific industries, like beauty, fitness, education, cleaning, consulting and more.
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, accessing support, and filing a claim.
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 provides general liability insurance to freelancers and contractors who need policies based on when they're working. Therefore, unlike other insurance providers, Thimble offers hourly, daily or monthly insurance policies. In this way, if you're a photographer who only needs insurance coverage for a day shoot, you don't need to invest in an annual policy that you won't be actively using.
With Thimble, you can input your basic information and receive a bindable quote in just minutes — online or by using its mobile app. Once you're reviewed the quote, you can purchase a policy, receive all of the relevant information online and even add crew members, additional insureds and send certificates of insurance — at no extra cost. Although most of Thimble's coverage is general liability, it also offers some professional liability policies as well.
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
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. Even if you have a side hustle or are just starting your full-time freelance business, the right insurance coverage can be essential to your growth and success moving forward.
Ultimately, the exact types of freelancer insurance you need will depend on the specifics of your business. Therefore, to ensure that you're getting the right policies and value for your budget, it's best to work with a business insurance company that has experience in the freelance industry and can work directly with you to find the best options for your needs.
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.