According to a 2017 survey by Upwork.com, 57 million Americans (36%) are now working as freelancers. Almost 80% of freelancers said they view freelancing as better than working at a traditional job. Half of them said they wouldn’t return to traditional employment no matter how much they were paid.
This shift in employment will likely continue as more people look for ways to better balance family life with work. While many feel that going freelance is all smooth sailing, it should be noted that in leaving a company, one also leaves the protection that company provides. For instance, a company has checks and balances to prevent things such as inadvertently copying another entity’s work, releasing software where a loophole or “backdoor” exists, or to protect them in the event that consulting advice goes awry. Then, in the event that something does happen, they have insurance and lawyers to protect them – and you.
Risks of Not Having Freelancer Insurance
Perhaps one of the most frightening phrases to the self-employed individual is, “Our company is taking you to court.” Whether stated in this manner, or the forms of “being sued”, “considering litigation” or “we will be talking to our lawyer”, just the thought of legal action is enough to make most of us sweat. It is especially in those moments that having freelancer’s business insurance is worth every cent!
What? You don’t have business insurance? Did you think it was an unnecessary expense? Perhaps you believe that being an LLC and having a contract is enough. But, should you ever find yourself in a sticky legal situation, that contract is rarely enough. The better your business insurance, the more protection you, your family and your company will have.
While any sole-proprietorship should have at least a basic insurance plan, those in the tech field – IT, consulting, web design, software engineering, etc. – would be remiss to ignore it. To go without means risks such as –
- Being sued by a client, despite there having been a contract because there was a failure to communicate; hence, they are totally unimpressed with the end result.
- A dissatisfied or unscrupulous client decides that you did something wrong or perhaps did not do something they thought you should have, so they will try sue you for supposed damages.
- If the consulting advice you give proves to be erroneous or faulty, that company can threaten to sue you for their loss of revenue or growth.
- We all depend on technology to get work done. If your equipment breaks, the computer crashes or even gets stolen, and you are unable to work, then you can be held liable and penalized for not hitting your deadline.
- If you take your equipment to a client site and they spill something, or damage your equipment, then having freelancer’s insurance will help cover the replacement cost.
- Conversely, if you damage equipment at a client’s location, they can require remittance. Without insurance, you will be paying that out of pocket, or perhaps find yourself in small claims court.
Types of Insurance for Freelancers
As you contemplate the insurance options available, it is important to carefully consider the type of work you do, any equipment you may use, and potential scenarios in which an extra layer of protection would be beneficial. Then, talk to someone well versed in the types of insurance available. Some of the most common types of business insurance for freelancers include the following:
General Liability Insurance is highly recommended because it can protect you from several of the most common liability issues such as third-party injuries, property damage, slander, and third-party medical bills. Another aspect that a General Liability policy will cover is copyright infringement. With so many blog posts, new products, apps, gaming software and other cyber elements being created and released daily it can be a challenge to ensure you did not plagiarize copyrighted material. In fact, there are times that companies have done their due diligence on a specific project or product only to discover via a legal notice that they are being sued for the use of copyrighted images, verbiage, or designs. A General Liability policy can help with court fees and other related expenses.
Errors and Omissions
E&O insurance, also known as Professional Liability Insurance, protects you against things like cyber security breaches – even if you are a third-party to said loss of data. This policy also covers you should you be commissioned to write code for a project, and while you thought you understood the desired end result and delivered on schedule, you find that what was delivered was not what was requested. Sadly, you can be sued for not delivering on time and for not providing what was wanted.
If you have others working for you, you don’t want to get sued should they trip over a box in the hall or develop carpal tunnel. Worker’s Comp is there to pay for work-related injuries and illnesses. Each state has its own Workers’ Compensation laws, so be sure to check the requirements of your state. You can take a look at Insureon’s resource here to look up the laws in your state.
Employment Practices Liability Insurance
This policy is designed to protect you against being sued by a disgruntled former employee.
*If you are looking for a free quote on General Liability or Errors and Omissions insurance, check out TechInsurance. They specialize in providing insurance to freelancers in the tech industry. We have partnered with them, so check out this link to get your free quote.
Josh Roley is the founder of HomeCoders. He has been a vocal advocate for remote work for over twelve years. He and his wife and 8 children live in the beautiful foothills of North Carolina.