This post was written by Hyke. Hyke is an all-in-one business administration platform for the top freelancers. From LLC formation to taxes, Hyke takes away all the pain with paperwork and helps you stay safe, compliant and save on taxes.
When you work as an employee, you don’t often have to think about covering your own health, liability, or property insurance. That’s because your employer takes care of those needs. For people who prefer working for themselves, however, the responsibility of getting all of the insurance they need falls on their shoulders.
Are you a self-employed freelancer? Then you must purchase insurance to protect yourself, and you will likely need more types of coverage than an average employee would. Hey, it’s just part of the cost of being your own boss—and we think it’s worth it!
What are the types of insurance that you’ll need to have in place when you’re a freelancer? Here’s the breakdown:
- Health insurance
- Business property insurance
- Liability Insurance
- Car Insurance
Why do you need these insurance policies, and how much will they cost you? Keep reading, as we’ll break it all down for you. This week, we’re taking a look at Liability Insurance. As a freelancer, these may be the most important tools for protecting your business. Stay tuned next week for the fourth installment in the series: car insurance.
Looking at Liability Insurance
No conversation about insurance for freelancers would be complete without discussing the importance of liability insurance. This type of insurance protects you when you’re sued for something that you did, or failed to do, that caused injury, loss, or damages to another person. The policy will pay legal fees to defend you against a lawsuit, and will also cover any settlement or judgment against you, up to the policy limit. And it doesn’t stop there. Liability insurance can even pay an injured person’s medical bills.
Bottom line: in a lawsuit-happy society, this coverage is a must!
Two types of liability insurance are available: general liability and professional liability. You might need both types, even if you form an LLC or corporation. That’s because, if you’re an LLC member or a corporate shareholder, you can still be held personally liable if someone claims that they were injured due to your negligence.
Luckily, liability insurance isn’t that expensive for most freelancers. Flexible Business Insurance policies can also be purchased in three month increments, so you don’t have to pay for a year’s worth of insurance for a short term contract. And, yes, this insurance is a fully deductible business expense. Nice!
Diving deeper into the two types of liability insurance:
- General liability insurance – This insurance is highly recommended if clients or customers will be visiting your office, as it protects from any harm that may come to them on your premises. For example, it will protect you if a client visiting your home office ends up slipping on the newly washed floor and breaking their arm. Even if you already have homeowners or renters insurance, don’t assume that you’ll be covered for these types of claims, as such policies typically don’t provide coverage for injuries to business visitors unless you pay for a special endorsement (see last week’s installment for more information on property insurance). Therefore, simply adding an endorsement to your homeowners insurance can help cover injuries suffered by business visitors.
This coverage is also recommended if you perform any work away from the office, like in a client’s office or home. It will cover any injuries or damages you cause while working. For example, if you knock over and shatter an heirloom vase while visiting a client at his/her home, you wouldn’t be left paying thousands of dollars out of pocket.
Is this insurance expensive? Not terribly, as you can usually get it for a hundred to a few hundred dollars per year. You could purchase it as part of a package policy, such as a BOP. Or, you could get it by obtaining a separate general liability insurance policy, known as a “commercial general liability (CGL)” policy, which might cost the most but will give you even more coverage. It is also commonly purchased with professional liability:
- Professional liability insurance – Because general liability insurance doesn’t cover professional negligence (damages caused by a mistake you made, or something you failed to do when performing professional services), you need a professional liability policy, too. This insurance is also referred to as “errors and omissions (E&O)” coverage.
Certain professionals, such as lawyers and doctors, are required by state law to obtain this insurance. But professional liability policies also commonly cover accountants, architects, attorneys, health professionals, engineers, insurance agents and brokers, and even creatives like copywriters and photographers.
Professional liability essentially protects against the unpredictability of clients. If they judge your graphic design work to be below par or believe your financial consultation left them worse off, they may decide to withhold payment, or even sue you for damages. This coverage provides peace of mind that if you are good at what you do, and honest in your business practices, your livelihood won’t be swept away in the litigious nature of the economy.
Where do I find Freelance Liability Insurance?
If you’re interested in liability insurance for freelancers, Bunker has you covered. Bunker’s mission is to remove insurance as a barrier to freelancers, by embedding it into the contracting process, and offering affordable, flexible policies that tailor to your unique business. For most freelancers, the online process can get you a free quote in under 5 minutes!
If you have any questions about which policy would be best suited for your business, Bunker’s insurance agents are always available to chat! Give us a call at 877-968-9108, email us at hello@buildbunker.com, or head to www.buildbunker.com to live chat and shop policies.
The Takeaways
- Our society loves lawsuits – so it’s a good idea to have liability insurance to protect against unpredictable accusations.
- General Liability protects against injuries and damages you cause in the course of doing business
- Professional Liability protects against damages caused by a mistake you made, or something you failed to do when performing professional services. For example, if a client claims that a copywriter made left a typo in their case study, a financial advisor gave “bad advice,” or a photographer’s work isn’t up to par, professional liability helps them cover the suit.
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