You are currently viewing Complete Guide to Insurance for Freelancers and Contractors

Complete Guide to Insurance for Freelancers and Contractors

Freelancing is becoming more and more popular among the younger generations with over 58 million freelancers as of 2021. Being your own boss and working on things you actually feel a passion for is what many people dream of doing. By pursuing your passion as a career, you become responsible for protecting what you worked hard to create: your business.

In order to avoid losing your dream, it’s important to get business insurance for your freelance gig. A shocking 41% of freelancers have not properly insured their business and think their personal insurance is enough to cover any business damages. While business insurance is not required by law, it is something you should highly consider to protect your assets and business.

This guide will help you understand what insurance for freelancers or contractors you need, how to get it, and how much it will cost you.

4 Types of Business Insurance Freelancers Should Have

In order to protect themselves, freelancers and contractors should invest in purchasing these types of insurance for their business.

1. Commercial General Liability Insurance

As a freelancer, you are responsible for your own actions and can be held liable if you damage someone else’s property or injure them while working. Commercial general liability (CGL) insurance protects you from these risks by covering the costs of any damages or injuries that you may be held responsible for.

More specifically, commercial general liability insurance protects against the following risks:

  • Bodily Injury: If you injure someone while working, CGL insurance will cover their medical expenses.
  • Property Damage: If you damage someone else’s property while working, CGL insurance will cover the repair or replacement costs.
  • Personal and Advertising Injury: This type of coverage protects you from any injuries that occur as a result of your marketing materials or advertising, such as libel or slander and even defamation.
  • Product Liability: If you sell a product and it causes someone to be injured, CGL insurance will cover the costs of any damages.

2. Professional Liability Insurance

Also known as errors and omissions insurance, professional liability insurance protects you from any legal claims that may arise from your work. This type of insurance is especially important for freelancers who provide professional services, such as consulting, coaching, or graphic design.

Professional liability insurance could offer coverage for a variety of things:

  • Breach of Contract: If you do not fulfill your contractual obligations, professional liability insurance will cover the costs of any legal claims that arise.
  • Accusations of Negligence: This type of coverage protects you if you are accused of failing to provide the level of care that a reasonable person would expect.
  • Missed Deadlines: Life happens and sometimes you can’t meet a deadline. If a client is unsatisfied and sues, professional liability insurance will shield you from the high legal costs.
  • Work Mistakes: Even if you do everything right, there is always a chance that something could go wrong with your work. If a mistake you made leads to financial damages for your client, you will stay protected.

3. Business Interruption Insurance

If your business is forced to shut down temporarily due to a natural disaster or other unforeseen event, business interruption insurance can help cover the costs of lost income and expenses. This type of insurance for freelancers can be especially important for people who work from home, as they may not have the same protection from their homeowner’s insurance policy.

Examples of what business interruption insurance can cover include the following:

  • Rent or mortgage payments
  • Utility bills
  • Lost income
  • Staff wages
  • Training
  • The cost to relocate

While business interruption insurance can cover the aftermaths of natural disasters, it may not cover damage from specific natural disasters like hurricanes or flooding. The main purpose of business interruption insurance is to help freelancers recover from financial loss due to a disaster.

4. Cyber Liability Insurance

With the majority of businesses now operating online post-pandemic, the risk of cyberattacks has increased. Storing your clients’ personal data on your computer or in the cloud increases the likelihood of a data breach. Recovering from a cyberattack is difficult for most freelancers, and, unfortunately, 60% of small businesses permanently close after six months.

With cyber liability insurance for freelancers, your business can get back on its feet quickly and get coverage for these four types of cyber security risks:

  • Privacy Risks: This type of coverage protects you if there is a data breach and your clients’ personal information, such as their Social Security number or credit card information, is exposed.
  • Network Security Risks: If your computer system is hacked or viruses destroy your data, cyber liability insurance will cover the resulting damages and cost of restoring lost data.
  • Operational Risks: This type of coverage protects you from any legal claims that may arise if your business is unable to operate due to a cyberattack.

Other Types of Insurance for Freelancers to Consider

Besides the major four types of insurance every freelancer should have, there are other types of insurance that will protect different—yet equally important—areas in your business. The more coverage your business has, the better equipped you are to face any legal or financial storm that might come your way.

  • Personal Insurance: While your business is important, don’t forget to insure yourself! If you become seriously ill or injured, personal insurance will help keep you afloat.
  • Product Liability Insurance: If you sell products, this type of insurance will protect your business from any legal claims that may arise from your products.
  • Commercial Auto Insurance: If you use your personal vehicle for business purposes, you will need to get commercial vehicle insurance.
  • Workers’ Compensation Insurance: If you have any employees, you will need to get workers’ compensation insurance to protect them in case they are injured on the job.
  • Intellectual Property Insurance: If you have any intellectual property, such as a patent, trademark, or copyright, you will need insurance to protect it from infringement.
  • Home-Based Business Insurance: If you work from home, you may need to purchase a separate insurance policy for your home-based business. This type of policy will cover any damage to your home that is caused by your business, such as a client slipping and falling on your property.

How Much Does Business Insurance Cost for Freelancers?

Business insurance for freelancers generally costs less than other types of small businesses like restaurants and retailers. Freelancers have less risk than other business types, so their insurance premiums are usually lower. Additionally, the amount you will pay for your business insurance will depend on what you are looking to insure.

And, the amount you pay also depends on these factors:

  • The type of insurance you need
  • The size of your business
  • The location of your business
  • The industry you are in
  • Your claims history

Freelancers can also reduce the cost of their insurance plan through what is called a Business Owners Policy (BOP). A BOP is a bundled insurance policy available to small businesses that includes property, commercial general liability, and crime insurance. You can customize your BOP to add other types of coverage, such as coverage for inventory lost or business interruption insurance.

Get Freelance Insurance with Bethany Insurance!

At Bethany Insurance, we understand how important it is for freelancers to have the right type of coverage. We offer a variety of insurance policies designed to protect you, your business, and your livelihood. To learn more about our insurance plans or to get a quote, contact us today.