About the author

Darren Cronian, the author of this guide, has spent nine years securing remote jobs and building a successful freelancing business. His goal is to help people find remote work. Read more >
Last Updated: 30 June 2023

Freelancers, independent contractors, and small business owners don’t have access to the same benefits and protections as employees in traditional jobs. One of these critical protections is insurance.

Freelancer insurance is vital because it protects against various risks and uncertainties. This in-depth guide examines the pros and cons, how insurance works, and what companies offer.

Freelancer Insurance: How to Protect your Freelancing Business
Why is Freelancer Insurance Important?

Freelancer insurance is vital for many reasons:

  1. Protection Against Financial Losses: Freelancer insurance protects you from potential financial losses due to accidents, errors, lawsuits, or unforeseen circumstances. If a client sues you for negligence, having professional liability insurance can cover legal defense costs and any resulting settlements.
  2. Credibility and Trust: Having insurance can also boost your credibility with clients. It shows that you are a professional who takes your work seriously and has a safety net to cover any issues that may arise during your career.
  3. Contractual Requirement: Some clients may require you to have specific insurance coverage before they sign a contract with you. Freelancer insurance is especially common in consulting, construction, and other professional services.
  4. Peace of Mind: Insurance provides peace of mind, knowing you’re protected in unforeseen events; this lets you focus more on your work and less on potential risks.
Pros and Cons of Freelancer Insurance

Like anything else, freelancer insurance has its pros and cons.

Pros:

  1. Risk Mitigation: Insurance offers protection against various risks, including lawsuits, property damage, and financial loss.
  2. Increased Professionalism: Insurance may make you appear more professional and reliable to potential clients, potentially leading to more business opportunities.
  3. Contract Compliance: Insurance coverage may be a requirement for some freelance contracts.

Cons:

  1. Cost: Insurance premiums can be significant, especially for a freelancer just starting or operating on a tight budget.
  2. Finding the Right Coverage: Finding the right insurance coverage that meets your specific needs can be complicated due to the many types of insurance and policy options available.
  3. Potential Over-insurance: There is also the risk of purchasing too much insurance, which can be a needless expense if the coverage is not necessary for your line of work.
How Does Freelancer Insurance Work?

Freelancer insurance works similarly to any other insurance. You first identify the type(s) of insurance you need, purchase a policy, and then pay a regular premium to the insurance company. 

In return, the insurance company agrees to cover specific costs associated with potential risks outlined in your policy. Different types of insurance are available for freelancers depending on their needs:

  1. Professional Liability Insurance: Also known as errors and omissions (E&O) insurance, this covers lawsuits related to your work, such as if a client claims you made a mistake, were negligent, or didn’t fulfill contractual obligations.
  2. General Liability Insurance covers physical injuries or property damage while doing business. For example, liability insurance would cover any resulting legal or medical bills if a client gets injured while visiting your home office.
  3. Business Owner’s Policy (BOP) Combines general liability insurance and property insurance into one policy. It’s often more cost-effective than purchasing the two policies separately.
  4. Commercial Auto Insurance: If you use your car for work-related tasks, commercial auto insurance covers any damages incurred while doing business.
  5. Health Insurance: As a freelancer, you won’t receive health insurance from an employer, so you must provide your own. If you qualify, you can buy this insurance from the marketplace during open enrollment or a particular enrollment period.
  6. Disability Insurance: This covers a portion of your income if you cannot work due to injury or illness.
  7. Cyber Liability Insurance: If your work involves managing sensitive information, this insurance protects against data breaches or cyber-attacks. Very important in this digital age.
  8. Workers’ Compensation Insurance: Though typically associated with traditional employment, this may be needed if you hire employees for your freelance business.

To secure an insurance policy, you will typically fill out an application with the insurance provider detailing your business activities. 

The insurance company will assess the risk associated with your business and determine your premium. If you agree to the terms, you will pay this premium regularly (e.g., monthly, quarterly, annually) for coverage.

In case of a covered loss, you will submit a claim detailing the incident and the associated costs to the insurance company. 

The insurance company will review the claim and, if approved, reimburse you for the expenses covered or handle payments directly, such as in the case of a legal settlement.

Companies Offering Freelancer Insurance

Numerous companies offer insurance tailored to freelancers and independent contractors. Each company offers different types of coverage, policies, and premiums. Here are a few examples:

  1. Hiscox: Hiscox specializes in business insurance for small businesses and freelancers. They offer various options, including professional liability, general liability, and business owner’s policies.
  2. Next Insurance: Next Insurance provides a range of coverage types for freelancers, including general and professional liability, commercial auto, and workers’ compensation.
  3. Bunker: Bunker offers insurance coverage specifically designed for independent contractors and freelancers, including general and professional liability.
  4. Thimble: Thimble provides flexible insurance policies for small businesses and freelancers, with options for hourly, daily, or monthly coverage periods.
  5. CoverWallet: CoverWallet offers various types of business insurance for freelancers, and their online platform makes it easy to get a quote and purchase coverage.
  6. Trupo: Trupo provides short-term disability insurance specifically designed for freelancers.

It’s essential to compare policies from different companies to find one that fits your specific needs and budget. Consider factors like the type of coverage, policy limits, deductibles, premium costs, and the insurer’s reputation for customer service and claim handling.

Disclosure

This article is intended to serve as a general informational guide about freelancer insurance. It does not constitute legal, financial, or insurance advice. As such, you should consult with an experienced insurance broker, financial advisor, or legal counsel to understand the risks associated with your business and make informed decisions about the best insurance coverage for your situation.

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