Let's paint a picture. Mia and Miguel both live in New England. Mia converted her garage and gives private ballet lessons on the weekends. The extra money she earns allows her buy herself a new (used) car. Miguel is freelance handyman. He supports himself full time and has a workshop at home. A bad ice storm hits, and both Miguel and Mia's properties suffer extensive damage.
Miguel has a Business Owner's Policy with business interruption coverage. Mia only has her homeowner's policy. Miguel's policy covers repairs to his home workshop, income lost while he can't work, and helps him continue to pay for the security system he relies on to keep all of his equipment safe. Mia's homeowner's policy refuses to cover damages to her garage, arguing it's now a commercial property, and definitely won't cover income lost while she can't work. Mia can no longer afford her car payments and has to give up her vehicle while she figures out her next move.
One of Miguel's customers sues him for breach of contact because Miguel missed a deadline on a job and it cost the customer money. Miguel's still in better shape than Mia though. He has professional liability insurance. His court costs are covered!
Which independent contractors and freelance workers need insurance?
Insurance isn't just for the big businesses or those with offices in Boston or Nashua. Even if you do freelance work on the side, you should know your options. You may not consider your side job worthy of insurance, but as Mia's fake scenario showed, it's not just those with business cards who may need a policy. Did you know, you have the same legal obligations as those big brand companies even though your income is likely far less?
You may need insurance if you
- are an independent consultant or a freelance photographer
- act as a make-up artist for weekend weddings
- have a small side business restoring antiques
- provide dog-walking services over your lunch break
- get paid to voice your opinion blogging for different companies
What types of insurance are available and how do they apply to me?
Chances are that you will need some types of insurance but not others, depending on the type of work that you do. The major types of insurance that could be applicable to you are below.
- Commercial auto-If you use the same vehicle for personal travel and your business needs, you may or may not be covered if you're in an accident on the way from a job. It's always worth asking your insurance agent to be safe.
- General liability-This policy covers losses arising from real or alleged bodily injury, property damage, or personal injury on your business premises or arising from your operations. If you install a new set of steps and someone injures themselves on them and blames you, you'd be covered. Or if you made and installed a sculpture in a client's home, and the sculpture was knocked over and damaged the floor, you'd be covered.
- Professional liability-Also called errors and omissions, this policy protects you against being sued by clients or former clients claiming that your product or service was negligent due to an error or accidental omission. If you make a mistake and gave incorrect advice and a client sued you, you need a professional liability policy to cover financial losses a client incurs.
- Worker's compensation- If you have employees, this type of policy helps cover costs from injuries sustained on the job. In most states, if you have employees, you are required to carry workers compensation coverage. Find out more about state requirements under the Worker's Compensation subheading here.
What's the difference between general and professional liability? If there are physical damages (to a person or a property), you need a general liability policy. If a client claims they've suffered financial damages, you need a professional liability policy.
What if I have a really tiny budget and can't afford insurance?
We understand that sometimes your head is barely above water with all of those bills. While insurance can be expensive, it doesn't have to be. A Business Owners Policy or BOP is a great choice for many. A BOP combines multiple policies to save you money. To learn more, see here.
It's hard to think into the future when you have a lot on your plate in the present, but even a small disagreement between you and a customer could turn into a costly lawsuit. Skipping insurance may seem like a reasonable risk, but many find out otherwise. Small business, freelancers, and big businesses are all subject to the same legal obligations.
The bottom line is that being uninsured or under-insured can cost a lot of money. Having the right insurance protects you from risks and shows clients you're a credible business person.
Get a free quote now through our website. There are no obligations and we promise not to put you on a mailing list or anything. Unsure of exactly what you may need? Call our office. We understand you have a lot to worry about, which is why we'll work with you to understand your business and find an affordable option.