More than 59 million Americans worked as freelancers in 2020, which is expected to exceed 90 million by 2028. Many also work full-time jobs, of course, but a substantial percentage generate all of their income through freelance work.
It can be easy to forget that freelancing is not just what you do; it’s a business.
Even if freelancing is only part-time or in addition to a full-time job, you’re not just working for yourself; you’re running a company with one employee.
That means your insurance needs include both personal and business coverages.
Here are the different types of insurance that each freelancer should have. Depending on the nature of your business, you may have additional needs.
Liability Insurance
Freelancers need liability insurance to protect themselves against lawsuits by people who are injured on your property or feel they experienced harm due to your work product.
That could range from falling or getting bit by your dog while visiting your home office to stepping on a nail you left behind at a freelance carpentry job to relying on the information you wrote in a blog article.
Depending on the nature of your business, freelancers typically start with professional liability insurance, also referred to as an Errors and Omissions (E&O) policy. You can expand coverage as your business grows or your work becomes more specialized.
E&O coverage protects you against litigation by people who claim they were harmed in some way by your work product and limits your liability in the event of claims or lawsuits.
You may also need General Liability coverage, especially if your freelance business involves an office or warehouse location that vendors or clients may visit. Also called “slip and fall” insurance, General Liability protects against claims or lawsuits for physical injuries incurred on your premises. This includes such incidents as getting bit by your dog.
Disability Insurance
Disability insurance protects your income if you are temporarily or permanently disabled. You are essentially risking everything if you don’t have a disability policy.
Remember, you are the company. If you can’t work, there’s no paycheck. That’s why disability insurance is often called “paycheck protection” insurance.
One in four Americans under 20 will experience a disabling accident or illness before retirement. As we get older, the risk steadily grows. Most disabilities occur outside the workplace.
The typical individual disability income policy pays about 65% of your monthly take-home pay while you are disabled.
Payments begin after an initial “elimination period” and continue to pay out for a specific timeframe. Depending on those time periods, the insurance is referred to as either Short-Term Disability or Long-Term Disability.
Other than through an employer, good sources for disability insurance include a group plan through a professional association or an individual policy bought through an agent. Most individual policies are for Long-Term coverage.
Health and Dental Insurance
Health Coverage
This should go without saying, but if you don’t have health insurance through other employment or your spouse’s policy, you must get at least catastrophic coverage to cover any significant illness or accident requiring hospitalization.
Most want more, such as a policy covering wellness checkups and primary medical care. Still, at the very least, you need coverage for the catastrophic-level medical bills that can quickly bankrupt a family.
Use the health insurance exchange website to see if you qualify for any discount or stipend on coverage based on income. Also, check with any professional association you belong to see if they offer any group health insurance plans.
Dental Coverage
Dental care can be expensive, and those without insurance may skip regular cleanings and checkups due to the cost. That can be a terrible decision not only for your appearance but also for your heart.
The connection between oral health and heart disease is well known. Bacteria and other germs from untreated tooth decay and gum disease spread throughout the body through your bloodstream. The heart is particularly vulnerable and can develop endocarditis as a result. Clogged arteries and strokes can also result from inflammation caused by oral bacteria.
Many insurance carriers offer individual dental plans. If your spouse is employed, you may be able to get group coverage through their place of work.
Life Insurance
If you have a family or any debts associated with your business, you need life insurance to give your loved ones the time to compensate for the absence of your income and to address any debt claims against your estate.
Term insurance is the most affordable option. The exact rates depend on your current age and health status. Term insurance doesn’t build any cash value, which is one reason why it costs less than what is known as “whole life” coverage.
Under a term policy, you pay a certain monthly amount for insurance coverage extending for several years. For example, you might pay $40 monthly for 20 years to get $1 million in coverage. At the end of the 20 years, the coverage ends unless renewed.
If you take out life insurance, make sure you name a specific person or persons as the beneficiary(ies). Otherwise, the proceeds will go to your estate. Individuals who receive life insurance proceeds usually do not have to pay taxes on the funds, but estates often do.
Other Considerations
- If you work from a home office, check with your homeowner or renters insurance to see if your office furnishings, equipment, and files are covered. If not, consider adding a rider large enough to replace at least the more expensive items.
- If you use your vehicle to attend client meetings, travel to job sites, etc., check with your auto insurance agent to ensure that an accident while on one of these business-related trips will be covered.
Final Thoughts
Insurance is one of those expenses that may not seem all that important until you face a claim situation. As a business person, you should recognize that the risk of operating without appropriate insurance coverage is too large to take.
Some insurance companies offer package discounts for taking out multiple policies. When getting quotes, consider asking each agent you contact to quote the entire spectrum of coverages you are thinking about. If the company doesn’t offer all the types of coverage, that’s fine, but if they do, you could save a significant sum on your premiums.
