For many freelancers, the only insurance coverage they consider getting is health insurance. That is not the type of insurance I am talking about. Many companies with whom you may do business will require you to have the following types of insurance: Professional Liability, Business Insurance, and Worker’s Compensation. Be sure to consult your insurance agent to discuss the types of insurance that are best for your business.
Let’s break down what each type of insurance is.
The first type of insurance to consider is Professional Liability Insurance. Believe it or not, there is an exposure risk in this field because people rely on your advice. This coverage protects you if a client is financially harmed (not bodily or mentally) from advice or performance from your service or the failure of advice. Professional Liability Insurance covers the payout up to the amount to which you are insured. The defense costs can be included or may be outside of the limit. It all depends on the type of policy you have. Take a look at the overall cost. If you have two policies that are equally priced, the policy where the defense costs and the liability limits are included in the coverage is the better policy.
The second type of insurance to consider is Business Insurance. Business Insurance is often packaged as Business Property Coverage and General Liability Coverage. The Business Property Coverage part of the package protects any of your business equipment: computers, off-the-shelf-software, copier, electronics, furniture, and so forth from damage. Think tornados, hurricanes, and floods. You may think these items are covered under your homeowner’s policy, especially if you work out of your house, but typically they are not because they are specific to your business. Talk to your insurance agent to be sure what coverage you have. The General Liability Coverage part of the package is coverage for any type of physical bodily injury and/or property damage to others. You may visit a client, trip on a computer cord, break your arm as you put it through a wall trying to catch yourself from falling. If you have this insurance, you are covered.
The last type of insurance to consider is Worker’s Compensation Insurance. Check with your state agency or your insurance agent about whether or not you are required to obtain Worker’s Compensation coverage because it varies by state.
In summary, it is important to talk with your insurance agent about the three types of insurance coverage needed for you and your business.
In Part 4, I will discuss four types of business models you may consider as you start your freelancing career.