Freelancers are a unique breed in the general workforce. They work independently, far from the HR departments of any large company, and yet they’re often called upon by companies and individuals to provide a specific service — whether it’s a written article, an illustration, ongoing virtual personal assistance or other lines of work.
The ultimate benefit of freelancing is freedom: The freedom to set their own schedule, balance their own budgets, and pick and choose the types of projects they want to take on.
However, unlike salaried employees, freelancers, like most independent contractors, are on their own in case things go south. They don’t get the benefit of company-hired legal services in the event of a legal dispute, or if a security breach exposes all their customers’ financial details.
That’s where freelance insurance comes in, which covers not just lawsuits but also damage to professional tools, tech and equipment, and any other major risk that threatens someone’s livelihood.
Is freelance insurance mandatory?
Unlike auto insurance for drivers, business insurance isn’t legally mandated for working professionals. However, some freelancers might find that their corporate clients require them to have it professional liability insurance in order to work with them.
Otherwise, it’s an optional type of insurance where the need depends on the profession and the professional.
But even if you don’t think you need freelance insurance — say, if you’re only side hustling as a freelancer, or if you’re in a line of business that’s not associated with a high degree of risk — it’s still worth considering.
But if you work with any type of client, or rely on special equipment to do your job, or store customer information on a server somewhere? You’re way better safe than sorry.
What does freelance insurance consist of?
Usually, freelance insurance boils down to the following types of coverages:
Professional liability insurance
Also known as errors and omissions insurance, professional liability insurance is the primary coverage associated with freelancers. It pays for damages in case of lawsuits arising from neglect or misconduct, or failure to deliver a service promised to a client.
Freelancers in creative or knowledge-based services – like graphic designers, copywriters, web designers, consultants and other professionals – can benefit greatly from professional liability insurance.
For example, if guidance from a consultant resulted in the customer losing money (say, a recommendation not panning out, or the recommendation was based on inaccurate information), or if a client takes issue with a service or product delivered by a service provider, professional liability coverage would help cover legal expenses arising from a potential lawsuit.
This coverage is extremely valuable, not just to the service provider (i.e., the freelancer), but also to the client – often corporate clients specifically request that their service providers have liability insurance as it protects both the service provider and the company.
Cyber liability insurance
An increasing concern for all companies and individuals today is the prospect of your sensitive personal and financial information getting into the hands of the wrong people.
Cyber liability insurance is a comparatively new type of coverage that supports freelancers in the event that their client database is hacked and stolen, if you are fined by a privacy regulator after a security breach, or if you lose income from having lost information or suffer reputational damage after being hacked.
Freelancers who work with sensitive client files, collect customer credit card information, or rely on cloud services to manage large amounts of data are highly vulnerable to cyber breaches. And the problem doesn’t just go away once your laptop is fixed – cyber liability insurance helps cover legal fees, pay for crisis management, deals with cyber extortion. Often, insurers work with freelancers well before any potential breach by identifying risks and gaps in their cyber security protocol help minimize risks.
Commercial property insurance
Professional tools and materials can get costly. Think camera gear for freelance photographers, high-end makeup for professional makeup artists, or exercise equipment owned by personal trainers – if they were stolen or lost in a fire, they could not only be difficult to replace, but lead to a period of income loss. Commercial property insurance doesn’t just cover workplaces, like a home office or studio, but also recovers damages related to the physical tools of your trade and the loss of product inventory.
Product liability insurance
Perhaps the least common form of freelance insurance – but no less important to the people who need it – is product liability insurance, which steps up to the plate in case a product manufactured by a freelancer causes injury to a customer.
This could apply to people selling food or health products, makeup and skincare, children’s toys, or exercise equipment, or anything that could cause possible unintended harm to customers.
While nobody ever plans for their expensive camera equipment getting stolen, or a data breach that exposes client data to malicious hackers, but the fact that it happens at all should compel freelancers to consider insurance.
Not only does freelance insurance offer peace of mind, but the cost is also considered a business expense, which makes it tax deductible (a freelancer’s two favourite words!). If the protection it offers isn’t enough to justify the cost, perhaps the tax advantages might.
