Insurance for Freelancers

If you are at work and something goes wrong in a way that damages someone else or their property, it’s likely that the company you work for, not you, will be financially responsible. This is true even for accidents in which you are technically at fault.

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But what if the company is you? Many freelancers, particularly those who have recently left a 9-to-5 and are new to being on their own, do not have insurance to cover accidents or damage they may cause while working, leaving them vulnerable to costly claims. This post will address how insurance for freelancers works, when it might be needed, and how to find the policy that is right for you.

Insurance for Freelancers: Protections and Best Insurers

Insurance is a way to protect against risk. Something may be extremely unlikely to happen, but to the small number of people it affects, it can be devastating. For a freelancer or small business owner, insurance is particularly important, because losses from injury or accident fall solely on one person, rather than being distributed among many people or entities.

Insurance policies are not blank checks, though, and every policy has exceptions. An obvious one is that policies will generally not cover harm someone intended to cause, particularly crimes. One that can be harder to determine is whether an incident was work-related. There are a lot of different ways of describing this idea, including “course of employment” and “scope of employment,” and what it means will vary from state to state.

Generally speaking, insurance guards against large losses. If you are a freelancer, you may also be considering operating as a formal business entity, such as an LLC, rather than as a sole proprietor. It’s worth noting that this has many benefits, including keeping your personal assets protected in the event of a lawsuit, but it doesn’t make your business immune to the cost of lawsuits. LLCs, S-corps, and other business organizations can purchase insurance just like people and the policy can cover the associated costs.

What Insurance does a Freelancer Need?

You are probably familiar with the difficulties that freelancers or the self-employed face in obtaining health insurance, which protects you from the costs associated with treating your illnesses and injuries. This post is concerned with different kinds of insurance: those that protect you from the costs associated with harm done by you or your business, and those that protect the assets of your business against the risk of damage.

Here are some of the kinds of insurance most commonly purchased by freelancers:

Liability Insurance

Insurance against the cost of damage done by you or your business is generally known as liability insurance. Liability insurance differs from health insurance, car insurance, and other types of insurance in the sense that, when a claim arises, the insurance company pays a third party, not the holder of the policy. Liability insurance typically covers damage that might result from your actions, as well as any legal costs associated with defending or sorting out the claim.

There are many different kinds of liability insurance. They share similar principles but differ in specifications. For example, “errors and omissions” insurance covers the cost of mistakes in professional fields other than law or medicine (which tend to be covered by malpractice insurance). In most instances, a general liability insurance policy, sometimes called commercial liability insurance, is sufficient.

Liability insurance is a must for many freelancers. Many of the people hiring independent contractors will make adequate liability coverage a condition of signing a deal.

Worker’s Compensation Insurance

Worker’s compensation insurance, often called “worker’s comp,” covers employees for the cost of treating injuries and illnesses sustained while working. Worker’s compensation insurance has been around in the United States for more than a century and tends to be heavily regulated.

While the federal government does administer some programs, most rules about worker’s compensation insurance are set at the state level. Every state except Texas has some kind of requirement for employers to provide worker’s compensation insurance, but the requirements vary considerably. Some states require companies with one employee to carry the insurance, although there are exceptions. 

If you are self-employed, you may think there is no need to have worker’s comp, especially if you have health insurance. But even if it isn’t required by law, worker’s comp may still be a good idea, because health insurance policies typically do not cover on-the-job injuries. Worker’s comp is so pervasive that healthcare companies have ceded the field, and will even prompt healthcare providers to ask people seeking treatment whether their injuries were sustained on the job.

Cybersecurity Insurance

Because the threats are still relatively new and the potential injuries are different, standard liability insurance policies may not cover claims involving various kinds of harm originating online. For this, there is what has become known as cyber insurance.

Cyber insurance can perform a wide variety of functions, but in general, it covers the cost related to dealing with data, both internal information and third-party data that someone has been entrusted with. Freelancers who work in Internet-dependent fields — a significant share of the freelance market — may benefit from cyber insurance coverage.

Other Types of Insurance

There are other types of policies out there that may specifically cover niche fields with specific needs — underwater welding insurance, for example. Then some policies cover parts of running a business that not every freelancer will need — for example, policies that cover company-owned buildings or vehicles.

For the latter, the type of coverage you are looking for may be “bundled” into common policies, like one for general commercial liability insurance. 

Freelance Jobs that Typically Require Insurance

Now that you know a bit more about the kinds of insurance out there for freelancers, you may be wondering whether it’s common to have insurance in your field.

Overall, freelance work is becoming an increasingly dominant portion of the economy; more than a third of employed Americans are “independent workers.” The increasing prominence of this kind of work means that the casual approach of a “side hustle” now faces a demand for professionalism, including a growing expectation that contractors of all kinds will carry insurance. This is happening even in fields such as copywriting, where it once would have seemed unlikely.

The following is a general list of fields where insurance is typically carried, but you should always check the state and local requirements of the place you’ll be working first. It doesn’t include professions such as architecture and accounts that may include freelancers but which have licensing requirements and may require more specialized insurance. And if you have a particular job that you are angling for, do some research on the client: they may require you to have insurance to do the work. 

• Plumbing
• Drywall
• Electrician
• Handyperson work
• Landscaping
• Appliance repair
• Pet care/grooming
• Event planning
• Fitness coaching
• Photographers
• Stylists/beauty workers
• Physical/occupational therapists
• Financial professionals/brokers

Insurance vs. Bond

You may have noticed that construction-related jobs are well-represented on that list. That’s not a coincidence; the relatively high risk of injury and property damage in construction work means that states often mandate some type of liability coverage. But there’s something related to insurance that you may need to take care of to set foot on a job site, one that may be imposed by the state or by the client you’re working for, and that is a bond.

Bonds, often called surety bonds, resemble insurance in the sense that they provide for financial reimbursement from work-related issues. But they are more like a contract among three parties: the client, the contractor, and the bond company, known as the surety. Bonds and insurance differ in several respects.

• Insurance generally protects against accidents. Surety bonds are broader. They can be redeemed even if no accident occurred, but the contractor didn’t uphold their end of the bargain for some reason, such as by completing a project late.
• Bonds protect against other types of behavior, too. For example, if some damages were caused by a freelancer’s unethical behavior, the freelancer’s liability insurance policy might not cover it; a surety bond will.
• With insurance, the freelancer pays premiums, but if an incident occurs, the insurance company is responsible for the costs. With bonds, on the other hand, the contractor is still responsible; the surety pays the client the agreed amount up front, and then the contractor has to pay back the surety.

One benefit of surety bonds is that, because the contractor has to pay back the money, they are usually much cheaper than liability insurance premiums. Some lines of work require practitioners to have a surety bond to get licensed. But usually, if a project requires that a freelancer be bonded, the client will usually require some form of insurance, so the savings opportunities are likely minimal.

Best Insurance for Freelancers

In response to the rapid rise in independent work over the past decade, many options have sprung up to provide insurance specifically targeted at freelancers. Here are some of the best options available:

Hiscox

Hiscox provides liability insurance policies that are specifically targeted at freelancers. Their clients include web designers, marketing consultants, and real estate agents. They partner with the Freelancers Union to offer some of their policies.

Thimble

Thimble’s policies are attractive to many freelancers, particularly those who are new or just starting. The company gives contractors the option to acquire coverage quickly online, to modify the policy as needed, and, perhaps most importantly, to pause coverage at any time, such as when business slows down.

Hartford

The Hartford company has been around for more than 200 years, so they have ample experience in the insurance business. They’re a big insurer with lots of different specialized policies and are also likely to have an agent or broker in your area, which can be helpful.

Three by Berkshire Hathaway

Three, as it is known, earns its name because it offers what is typically known in the insurance world as a “bundle”: several kinds of protection in one policy, which can save money. It’s best for small businesses with some assets because it includes business liability, worker’s comp, and specific coverage for company property.