Are You Putting Yourself at Risk as a Freelancer Without Insurance?
Given the trend of workers giving up their office jobs and daily commutes to work independently, the demand for consultant insurance has gone up exponentially. As a first-time consultant, you might wonder if you even need to be insured. The reality is insurance for freelancers (professional liability) is an essential risk mitigation tool, and should be a priority while setting up your budding business.
Why You Need Consultant Insurance
Over the course of the COVID-19 pandemic, many employees became used to the comfort and convenience of working from home, and as many companies attempt to return to normal they are often not prepared to return to their previous work arrangement. It’s no surprise that the appeal of freelance consulting, with its flexible hours and ability to work from anywhere, has become more appealing to many.
Unfortunately, many new freelancers have gone into consulting without realizing that there are numerous inherent risks to this type of work. As an employee, you were protected by your employer’s own insurance policies, but now that you’re on your own, you could potentially be liable for causing losses for a client, and even injury or property damage.
A Personal Insurance Policy is Not Enough
Consultants often assume that their personal insurance policies will also protect their business, but this isn’t necessarily the case. Your personal plan might provide some coverage for things like property damage for a home office, but it will not protect you against any claims related to business liability.
For example, if a client has a slip and fall incident at your home office, and they file a claim to cover medical expenses, your homeowner’s insurance will not likely cover this since it was a professional meeting. When meeting a neutral location, such as a coffee shop, if you have the right business insurance policy, you and your client would be covered if an accident happened that damaged their property, such as spilling coffee on a laptop. Professional and general liability are a good idea for any new freelancer.
Recommended Insurance for Freelancers
An independent consultant will require many of the same types of insurance as a larger business. If you have no employees, it is advisable that you invest in the following policies detailed below.
This type of insurance will protect you in the event that a dissatisfied client claims you have been negligent in some aspect of your service provision. Also known as Errors and Omissions Insurance, this policy will cover expenses related to legal judgment, defense, and settlements.
If someone is injured on your premises, or you incur damage to a client’s property, General Liability Insurance will have you covered. Also known as Commercial Liability Insurance or Business Insurance, this plan will pay for both medical and defense expenses.
As an independent consultant without the extensive cyber security of a larger company, you are particularly vulnerable to cyber threats. This type of insurance will protect you if your digital security and data is compromised. For example, it will cover damages and fees associated with recovering data, restoring client profiles, and repairing compromised systems.
Is Insurance for Independent Contractors Legally Required?
While the types of insurance outlined above are always a good idea, there are some situations where insurance might actually be mandatory. Let’s examine some of the more common scenarios where you would need to show proof of insurance.
If you are renting any type of workspace, most landlords will ask to see proof of liability insurance. Having liability coverage can protect both you and the landlord if someone gets hurt on the property.
Many client contracts, particularly those involving technical work or anything healthcare-related will require either general or professional liability insurance (or sometimes both). It is not uncommon for clients to ask for proof of insurance before they will do business with a freelance contractor to ensure they will be protected in case something goes wrong during the course of business.
In some cases, a lender will ask for proof of insurance to make sure their investment is secured in a worst-case scenario. A lender investing in a small business will most likely ask for proof of both general and professional liability coverage.
There are several online platforms, such as Upwork, that require proof of insurance before you can advertise your services on their marketplace. Even when the insurance isn’t required, it’s still a good idea, because anything can happen when finding and partnering with other businesses over the internet.
Protection for Freelancers and Consultants
Whether insurance is required by law or not, having peace of mind from knowing that your business and its assets are protected is invaluable. You will want to research the particular risks that you are exposed to in your line of work and plan accordingly. At NOW Insurance our policies are tailored to each type of consultant and flexible so that you only pay for the insurance you need.
Shopping for and purchasing the right policy is simple, fast and affordable with NOW. Get an online quote in under 3 minutes with our online application. If you aren’t quite ready, check out our quick guide for shopping for professional liability online.