Business Insurance for Freelancers | SUCCESS

Getting sued might be every freelancer’s worst nightmare.

A decade ago, Reyna Gobel, MBA, MPH, a freelance journalist and speaker, was asked to edit and fact-check an article about 10 celebrities who had declared bankruptcy. The online publication paid her $125, well below Gobel’s normal rate, but she took it on as a favor because she wrote for this media outlet often.

Gobel looked up bankruptcy records as part of the fact-checking process. However, she was eventually sued, along with the publication and 40 others, for including the wrong celebrity in the article. The celebrity’s name was the same as the person who had declared bankruptcy, but the correct person used a middle initial.

“The case eventually ended up being thrown out,” Gobel says, “but not before I ended up with a $1,500 legal fee.”

The fees could have been worse, she adds. She’s grateful to be a member of the American Society of Journalists and Authors, which referred her to an attorney who could help her for a lower price than other attorneys.

As a freelancer or independent contractor, you may think your business is too small to need insurance. However, because of your independent status, it’s likely that your clients won’t cover any liability that arises based on your work. Client contracts sometimes even require you to have freelance business insurance.

Business insurance for freelancers can be confusing

According to a survey by Next Insurance, “40% of small business owners said it’s more stressful to understand insurance than taxes.” When asked basic insurance questions, 96% of small owners didn’t achieve a passing grade, and only 10% of those surveyed felt “completely confident” that their business was sufficiently insured.

The bottom line: More than half of those surveyed said their biggest barrier to getting coverage was understanding what insurance their business needed.

Read on to learn about potential risks to your business, how to limit them (if possible) and which types of business insurance for freelancers can cover your business in those situations and help you pay for legal fees and settlement costs.

General liability insurance for freelancers

This is the most common insurance that small business owners purchase. The above Next Insurance survey found that 52% of small business owners had purchased it.

General liability insurance provides coverage for three specific types of business-related liability, says Jay K. Williams, the head of faculty and academic development at the Risk and Insurance Education Alliance. These types include:

1. Bodily injury: According to Williams, one example of this would be if a freelancer is using a projector for a presentation and someone trips over the cord and breaks their arm.
2. Property damage: An example of this type of liability could be if you’re a handyperson and you knock over an expensive vase while carrying your ladder into someone’s house, Williams says.
3. Reputational harm: This type of damage occurs when you say or write something that can potentially cause personal or financial harm. An example is if you say something untrue about a competitor on social media.

An easy way to remember these three types of liabilities, Williams says, is this: “You broke my arm, you broke my stuff, you broke my heart.”

Professional liability insurance for freelancers 

This type of insurance, also known as errors and omissions insurance, may be helpful if you offer a professional service, advice or consulting or if a client includes this requirement in your contract.

Williams defines professional liability insurance as “‘I screwed up based on what my professional conduct should have been.’” That could mean financial loss or property damage—or even bodily injury, in the case of doctors. Policies are written for your particular industry because every type of freelance business has different risks.

As a freelance computer programmer, Williams says, you could create a coding error that leads to financial loss. An engineer, he adds, could make a design flaw that could lead to property damage.

For writers, graphic and web designers, publishers and others who provide media content, this type of professional liability insurance is sometimes called media liability insurance.

Cybersecurity insurance for freelancers

According to an SBA survey, 88% of small business owners felt their business was vulnerable to a cyberattack. Because of this, it makes sense that cybersecurity insurance, also known as cyber insurance or cyber liability insurance, is growing in popularity.

This type of insurance for freelancers protects work stored on their computers and online, says Rafael Espinal, executive director of Freelancers Union. Freelancers who might want to consider this insurance include those in industries like accounting and legal, as well as graphic designers and photographers. These individuals often deal with sensitive information and images that need to remain private.

Cybersecurity insurance may also cover hacks and leaked information, as well as ransoms for information taken from a computer, Espinal adds.

Insurance companies and pricing

Many companies—such as Biberk, Insureon and Next Insurance—provide business insurance for freelancers, and prices vary widely.

One way to get better pricing is to join an organization that offers insurance at a discount for members.

For example, the National Federation of Press Women offers its premium members discounted libel insurance. Freelancers Union, a nonprofit organization with 750,000 members that is free to join, provides its members with access to a variety of insurance types at discounted group rates, including several kinds of freelance business insurance.

Espinal shared Freelancers Union’s monthly insurance rates, which are offered through Hiscox, as of the time of writing:

• General liability: $22.50–$40
• Professional liability: $22.50–$35
• Cybersecurity insurance: $20.50–$30

As a comparison, one freelance journalist shared that she bought a professional liability, errors and omissions policy directly from an insurance company for $643 per year, which is about $54 per month.

Common insurance misconceptions

As I was researching for this article, several freelancers told me that they didn’t need business insurance for freelancers because they were covered by personal umbrella policies.

But this isn’t true, Williams says. These policies don’t cover any type of business liability.

A personal umbrella policy offers additional coverage beyond what you purchase for your personal assets, which is typically home and auto insurance. Williams says that umbrella policies generally offer coverage starting at $1 million. An example of this is that if you are at fault in a car accident and damages are more than your existing $300,000 auto policy limit, your umbrella policy will kick in after the $300,000 has been paid from your original policy.

Another misconception is that if you own a limited liability company (LLC) or S corporation as a freelancer, all your assets will be shielded from liability, so you don’t need freelance business insurance.

In reality, your personal assets may be safeguarded, but your business assets will still be at risk. These include business bank accounts, property purchased by the business, vehicles registered in the name of the business and personal assets used to guarantee a business loan or line of credit.

Limiting and covering risks for your business

There’s no way to totally prevent risk in your business, but consider taking steps to limit your liability when you can.

Gobel shares three risk-limiting tips for freelance writers, fact-checkers and editors:

• Use only original sources: When Gobel was sued, the celebrity was cited incorrectly as having declared bankruptcy in 40 other publications before Gobel’s piece was published. Using information from existing articles, especially if it’s sensitive financial or medical data, could be a recipe for disaster unless that information is part of a study or original research conducted by the writer.
• Turn down work that pays you too little for the research required: Gobel says that the best way to fact-check her article would have been to contact each celebrity or the celebrity’s representative to confirm the bankruptcy. To do that, Gobel would have charged the publication several thousand dollars, which it did not have. She had already put in a full week and looked through bankruptcy records, which the publication didn’t require her to do.
• Join an association: “They can give you the right advice when you get in a jam,” Gobel says.

If you’re considering purchasing freelance business insurance, make sure you understand what you’re getting.

“One of the most important things [you] can do is have a conversation with [your] agent,” Williams says. “Say… ‘Does my policy cover this? And what doesn’t my policy cover?’”

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