There are probably a few reasons you love freelancing – whether it’s being your own boss, bringing in extra income, or simply pursuing a passion. It is however important to keep in mind that freelancing doesn’t rid you of risks in the work you do. The possibility of certain things going wrong while providing services is always there, regardless of if you do this as a business owner, or freelancer. This is why insurance is worth considering if you’re currently freelancing, or thinking of starting a side hustle.
What is a freelancer?
You are considered a freelancer if you offer your services for a fee with no expectation of permanent employment, and receive your income based on the jobs you do, rather than working under an employer. In most cases, freelancers work on their own, but may also engage contractors as their client base grows.
Why might freelancers need insurance?
Whether you freelance as a side hustle, or it is a full time source of income for you, it’s unlikely the work you do does not carry some form of risk. Even if you just have one client, this brings with it an exposure of this client being unhappy with your service, or alleging negligence. If such events do occur, legal fees to defend yourself and compensation if required to be paid can get out of hand very quickly. Freelancers should therefore consider taking out appropriate insurance for their activities to ensure that if they do suffer an unfortunate event, they don’t find themselves overwhelmed with the financial impacts. What Insurances should freelancers consider? There are several types of insurance available to you as a freelancer – you might need multiple, or just one depending on the nature of your work. Let’s look at the main types of insurance you may want to consider…
Professional Liability Insurance
Also known as Professional Indemnity Insurance, or PI, this applies to you if you’re involved in providing advice or a service in your freelancing. For example, if you’re a designer; writer; marketing consultant or IT developer, you may want to consider this.
PI is designed to provide cover if a client alleges that your service or advice caused them a financial loss. For example, say you build a website for a client, and they allege the way the website was structured was not best practice, and led to the client incurring further cost to have the website redesigned. In this instance, if the client took legal action against you, you’d potentially be faced with substantial legal bills, as well as compensation to pay. Coming up with that kind of money isn’t easy, so PI can help to ensure you’re not forced out of business, or have to go into debt to pay for these costs.
General Liability Insurance
This is applicable if you meet with clients (or any other members of the public) in person in the course of your work, whether that’s at their office, or out in public. Meeting and interacting with anyone face-to-face as part of your service, whether they’re your client or not, carries with it a risk of being held liable for personal injury or property damage.
Even a small mistake like spilling coffee on someone’s laptop can lead to you being held liable for the damage. If your service involves meeting people in public, then Public Liability Insurance would be wise for you to consider. It is designed to protect you if a third party alleges your negligence, or activities caused them to suffer an injury, or have their property damaged. If you work for clients where you are required to attend their premises, or work from their office, then it’s also possible your clients will require that you hold your own Public Liability insurance before you’re allowed to commence work for them.
Depending on the business you run, it’s likely you also own certain tools and equipment to run your business – some of which can be very expensive. If something happened to these tools, like if they were stolen, or accidentally damaged, then needing to replace them would cause you some serious financial strain. In addition, you may find yourself without an income completely during the period it takes to replace or repair it, and risk making your clients unhappy if there are delays in meeting their deadlines. There are various property policies available to cover the tools you might use for your business.
For example, a Business Package Insurance policy can help you cover your laptops and any other office equipment if they’re damaged by storm, fire, theft and other events. If you’re a freelance photographer however, you may instead need a policy that is specifically tailored for photography equipment. No matter what type of policy you do take out for your equipment and/or electronics, be sure to thoroughly understand what events they will be covered for. For example, some policies only offer accidental damage as an optional cover for an additional premium. In addition, you should also check whether your equipment will be covered while you take them away from your home/office – don’t assume this is an automatic inclusion. This is especially important when you work as a freelancer as you might work from various locations based on your clients’ needs.
Engaging subcontractors In deciding the insurance policies you need, also consider whether or not you also engage subcontractors. If you choose to outsource some functions of your work, especially during busy periods, this may impact the coverage under your policy. This is particularly important to bear in mind when it comes to Professional Indemnity Insurance. If a subcontractor you use makes a mistake in their work, and your client holds you responsible, then your Professional Indemnity insurance may not cover the claim if you did not disclose that you were using subcontractors. If you are engaging subcontractors therefore, informing your insurer beforehand can help prevent a gap in your coverage.
How much does insurance cost for freelancers?
The cost you end up paying for insurance as a freelancer will vary based on the nature of your service and the cover you take out. A number of factors are taken into consideration, like your profession, the equipment you want to insure, the number of clients you have, as well as your turnover. These factors all play a part in determining your premium, regardless of whether you’re a freelancer or run a small business with employees. If you engage contractors as part of your freelance work, ensure you also notify your insurer of this as this may also impact your premium. Failure to do so may lead to a claim not being covered. As you can see, freelancing does not eliminate the need for insurance. If you’re still unsure of which covers you might need to protect yourself, speaking to a broker can help you understand where you face risks in your work, and the covers that may protect against certain incidents.
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