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Starting a business can sometimes happen so gradually you almost don’t notice. First, you help a friend by making a website or fixing a sink; then, a few other side projects come up. Before you know it, boom, you’re a full-time freelancer. When that happens, it’s not uncommon for freelancers to make financial mistakes like not saving for retirement, setting up a business entity, or purchasing small business insurance.
Some freelancers may think their business is too small to need insurance. But businesses of all sizes could benefit from protection against common business mishaps. Here’s an overview of some of the policies that freelancers are likely to need and what type of incidents they can cover.
This is the first policy most freelancers buy. It 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 general liability 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. If a web designer spills coffee on a client’s laptop during a presentation, it can pay for repair or replacement of the damaged laptop.
This policy also guards against advertising injuries, which include:
This 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.
Commercial property insurance can help protect the investment freelancers make in their business by covering equipment, including computers, tools, and office furniture. Even when working from a spare room, it’s still a good idea to buy commercial property insurance. Most homeowner’s and renter’s insurance policies exclude or limit coverage for business property.
In most cases, freelancers can qualify for a business owner’s 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.
While general liability protects against claims of property damage or personal injury, professional liability insurance can help cover legal bills for lawsuits related to professional services. For example, it 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.
In a nutshell, this policy, also known as errors and omissions insurance, covers freelancers accused of making a professional error, including:
If freelancers are sued over the quality of their professional services, this policy can pay to hire a lawyer and also pay for any judgments against freelancers who are found liable.
The need for a commercial auto insurance policy isn’t limited to people who own a commercial vehicle, such as delivery drivers or traveling salespeople. Anyone who drives while conducting business could benefit from this coverage, too. For example, if a freelance accountant gets into an accident while driving a personal vehicle to a client meeting, a personal auto policy might not cover the damage since the vehicle was being used for business purposes.
A commercial auto policy can close this gap in coverage by offering:
Freelancers who frequently drive rental cars for work purposes may benefit from hired and non-owned auto insurance, which can cover damage caused by cars they are driving but don’t own.
One of the biggest challenges facing businesses today is the threat of a data breach. Not only can they be disruptive, they can also be expensive. The average cost of a small business data breach is $86,500, according to a report by Internet security firm Kaspersky Labs. Without the protection offered by cyber liability insurance, a breach has the potential to wipe out a freelancer’s finances.
Freelancers who store sensitive customer data, like credit card numbers, could benefit from cyber liability coverage. In the event of a breach, it can help pay for:
Although anyone can be the victim of a cyberattack, freelancers who work in occupations such as healthcare and financial services are more likely to be targeted.