Being your own boss can give you the liberty to pursue your passion, however, starting a business is costly. Luckily, the growing freelancing industry is changing that. Not only is the freelance market booming, but it gives you the flexibility to make your own schedule and work remotely.
Hiring freelancers is also a cost-effective measure for small business owners since they don’t have to pay for the salary and benefits required for full-time employees.
But, working as a freelancer comes with risks. Since freelancers work with numerous clients, they’re leaving themselves open to liability. This is where commercial insurance comes in. Keep reading to find out which policies are best for you and your business.
What exactly is a freelancer? Well, the definition of a freelancer is an independent individual who takes small creative based jobs on a temporary basis. Really, almost any industry could be done in a freelancing capacity. Marketing, administrative assistant, insurance agent, attorney, graphic design, interior designer, consultant, and contractor are just some of the freelancing titles we have seen on an ongoing basis. All of these jobs have risks since they are often providing a service to a client and that client expects to have the same great outcome from the freelancer as it would from a company.
Generally, a freelancer can provide an even better experience for customers since they are able to offer that one on one attention that they may not get if they hired an employee or company to take care of their needs. Unfortunately, this can also mean that you, as a freelancer, face more risk than an employee or company. A company is going to take the fall if you make a mistake if you were their employee. As a freelancer, you are responsible for everything and without the proper insurance in place, it could be devastating.
Due to the sheer number of unforeseen events that could happen, insurance is crucial. If a fire should start, or even a nasty storm that can take out your business, will you be able to get back up and running quickly to continue to support your clients? Making typos or forgetting to do something could have dire consequences for your clients depending on your freelancing work. If you are a web designer and design a website for a customer and on the day it is supposed to go live there is an issue, that could cost them a lot of time and money which they will then be looking at you to pay for. Do you have thousands of dollars sitting around to pay for human error?
While you may not have an actual office that you work out of, if you have clients meet you at your home you could be sued if they should become injured. Additionally, if you are working onsite at a client's place of business and damage their property, you will be held liable. General Liability insurance will cover these unfortunate events. We live in a litigious society, so even if the customer has millions of dollars, they are likely to seek reimbursement from you.
General Liability insurance also covers personal advertising injury which includes slander, libel, and defamation. Have you ever gotten frustrated with a customer, or even a competitor and vented about it to a friend or family member? Perhaps you posted about it online, or at least considered it? If any of these things are true or have the potential to be true, you could be facing a lawsuit. Social media is such a great way to advertise your freelancing services, but you have to be careful with what you post. Talking badly about a client or competitor could wind you up in court with a lawsuit.
Even after all this talk about lawsuits and injury, you may be feeling like you still don't need it. And maybe, hopefully, you won't ever need it but just think of how it will look to your customers if they know you have your business insured. Even as a one-man operation, whether you work 60 hours a week or 20, there is still risk and customers understand this. They will be much more likely to do business with you versus another freelancer who decided they would take their chances.
A lot of freelancers are consultants or designers. If you are in the business of offering any kind of advice, plans or offer a specialized profession like web design or marketing, you should absolutely have Professional Liability insurance. Freelance Professional Indemnity insurance, also known as Errors & Omissions or E&O insurance, is vital to many freelancers. You may promise a client that you will get them certain results by providing your specialized services. If those results are not achieved and the client was expecting to make a certain amount of money because of it, you could be looking at a lawsuit. One small mistake can cause a financial hardship for your customers and they are going to expect you, as the expert in your field, to pay for it.
Even if you are not found at fault, and the customer simply did not like the end product but you did the best you could, if they take you to court you will have to defend yourself. Court costs and lawyer fees can add up quickly to tens of thousands, even hundreds of thousands of dollars. The latest survey showed the average cost to defend a lawsuit in court was $90,000. Without Professional Liability insurance, you would have to pay this amount out of your pocket. If you plan to use your profits for other things like paying off debt, buying a home, or taking lavish vacations then you should have E&O insurance.
Another major area where some Professional Liability claims come into play in the freelance world is photographers. Customers are counting on you, as a freelance photographer, to provide them with amazing photos that they can cherish for the rest of their lives. Whether they hire you for a wedding, corporate event, family photos, newborn photos, or just because photos they expect to get what they pay for. You could make a small mistake like forgetting to have a backup battery and it dies, or you could accidentally delete all the photos you took. Any of these scenarios can happen because you are human after all. The right insurance for photographers will pay for the damages awarded, if any, and for your defense costs.
Usually, when you hear the words Workers Compensation you think of big businesses that have a lot of employees. However, this is not always the case. As a freelancer, you may need Workers Compensation as well. Since you are working for yourself and by yourself, your business is at risk if something should happen to you. You are likely to work on a computer these days, so what happens if you suffer from carpal tunnel and are unable to complete your work? Not only will your client be unhappy and you will likely not get paid, but you may also incur some medical bills. Workers Compensation will pay for both the medical bills and your lost wages as a result of the injury. Another scenario to consider is if you are driving to and from clients, meetings, or even making a bank deposit and you are in an accident. Or, if you are doing work with a client and trip over something or get severely ill from someone on the premises.
You also should be aware of when you may be so busy that you have to hire help. If you decide to hire someone as an employee, you may need to cover them under Workers Compensation depending on your state. Some states require it as soon as you hire an employee while others require it after a certain number of employees. Although, if you decide to hire some help as a 1099 contractor then you will not have to cover them on your Workers Compensation, but you should make sure they have their own insurance because if they don't and suffer a work-related illness or injury you can be held liable. If this happens then you will have to cover them under your Workers Compensation insurance policy. Even something small like a broken finger can cause an issue if you don't have the right insurance in place.
Freelancing can be a great opportunity for those people looking to work for themselves without the high overhead that some businesses can face. However, it can all come crashing down with one claim or lawsuit. Make sure you are properly protected with the best insurance policies. You can obtain no-hassle quotes today online with CoverWallet.
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