Freelance Insurance: From Health to Liability

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Striking out into the world of self-employment can feel empowering – at first. Then you’re suddenly faced with all the responsibilities that fall squarely on your shoulders. All the things that your employer would previously have taken care of become your problem. At the top of that list is the hassle of freelance insurance – especially ensuring you have medical cover.

In this article, we cover the various types of freelance insurance you HAVE to have, which are a wise idea, and some extra options that can buy you more peace of mind.

Insurance is rather different between the US and the UK, so below we cover how freelance insurance works in both countries. If you’re elsewhere, there are likely to be other regional cultural quirks.

Freelance Insurance in the US

You may be wondering: “do freelancers need insurance?” When it comes to healthcare in the US, the answer is “yes.”

US Health Insurance

Since 2014, the Affordable Care Act has required that everyone in the US has health insurance. The law has been up for possible review recently, but at the time of writing, it IS the law in the US to have health insurance.

Currently, there is a penalty for not having health insurance, which is $695 per adult or 2.5 per cent of annual income, whichever is the highest. The amount is capped at $2,085 per family. As of now, there is a tax bill in process that doesn’t eliminate that penalty until 2019. However, according to CNN Money, people who have not had insurance for less than three consecutive months the previous year are exempt.

If you don’t have an employer, or cover via your spouse’s employer insurance, you are required to source your own health insurance through the government’s marketplace. Depending on how much you make in a year, you could qualify for vouchers to cover (or help cover) the cost of the insurance. Certain income levels may mean you have healthcare provided by your state.

If you have lived with your significant other for a long time, you may qualify for a domestic partnership. You can check with your state and with your partner’s insurance company to see if they would allow you to go under the same policy.

Car Insurance in the US

In the US, auto insurance is also compulsory. That means if your self-employment involves driving in any way, such as to visit clients or make deliveries, you’ll need to make sure that whatever vehicle you’re driving is insured for that use.

There are commercial auto insurance policies available that can help provide more extensive protection, such as cover for employee accidents or coverage on cars you borrow.

Liability Insurances in the US

Professional liability insurance is not mandatory in most US states. However, you may well encounter clients who insist you to have it as part of your contract. Professional liability insurance can cover you if someone sues you to claim financial loss as a result of your business activities.

If you complete work where you could find yourself with a financial liability, indemnity insurance is a must. For example, if you’re a “one man band” computer consultant, failure to back up a client’s data could result in an expensive court battle. If you do ANY work where a mistake could lose your customer money and see you getting sued – from accounting to virtual assistance work – it’s well worth having relevant insurance. Such insurance is often called “errors and omissions” in the US. Sometimes you may hear the term “professional indemnity,” which is more commonly used in the UK.

You may also want to consider types of freelance insurance that cover being sued for slander or libel if you write or work in the media. Coverage for these issues sometimes goes beyond standard professional liability insurance. It may be called an umbrella policy or excess liability coverage.

Businesses and freelancers in the US that employ people also usually need to carry workers’ compensation insurance, depending on the size of the business and your state laws. You can compare laws by state here.

Hiscox is a good place to find out what you’ll need to pay for freelance insurance in the US. 

Freelance Insurance in the UK

UK Health Insurance

If you are in the UK, you are fortunate that (at least for now) you don’t have to worry too much about health care. Everyone is covered under the National Health Service, which is paid for with National Insurance contributions.

That said, with waiting lists growing and the NHS under the threat of privatisation, you may still think it worthwhile to consider some private cover. Having to wait a considerable amount of time for an operation could create a major problem if it stops you being able to earn your freelance income.

Business Car Insurance in the UK

Car insurance is also mandatory in the UK. If you use your car for any kind of business use, it’s essential to declare this when obtaining a quote, otherwise you could invalidate your policy. Business use doesn’t usually add too much to a policy.

Commercial car insurance plans are also an option, but generally only relevant if car travel is an integral part of your freelance work, or if you run multiple vehicles.

Liability Insurances in the UK

Professional indemnity insurance and public liability insurance are not mandatory types of freelance insurance in the UK. However, almost all UK businesses are required to have employers’ liability insurance if they employ anyone. You can review the legislation here.

Public liability insurance is still all-but-essential, and usually comes as part of most combined business insurance policies. This type of insurance is to cover you if a member of the public sues you. This could be for anything from slipping over in your office to taking you to court for spilling a drink over a valuable computer or smartphone!

Professional indemnity insurance is slightly different, and is basically the same as “errors and omissions” cover in the US. This is to cover you for mistakes and oversights including anything from defamation to unintentional copyright infringement or negligence.

Employers’ liability insurance, which is a mandatory requirement if you employ anybody, covers you for claims filed against you by employees.

Other Freelance Insurance to Consider

There are also other types of freelance insurance out there that will help increase your peace of mind and ensure the security of your business and future. There the key types:

Other specific types of business insurance

You may want to look into policies like a specific home-based business policy. These can protect you against business-related losses that aren’t covered by your home insurance. Often these plans can incorporate other covers discussed above, such as liability and professional indemnity insurance. A good place to look for a variety of business insurance plans is Hiscox:

Property/equipment insurance

You may also want to look into freelance equipment insurance policies. These too can often combine with other types of business coverage under one plan. Sadly it’s far from unusual to hear of tradespeople being robbed of their tools, or mobile hair-dressers having equipment stolen. Business equipment like this is rarely covered on a home insurance policy. 

Disability / critical illness insurance 

When you work on your own, you suddenly realize you have no safety net in case of injury or illness. Gone are your sick days, vacation days and workman’s compensation.

Thankfully, you can independently purchase disability and/or illness insurance, which can help cover a portion of your cash flow if injury or illness prevents you from working for an extended period.

Life insurance

One major benefit of working for a traditional employer is that many of them offer some type of life insurance policy. If you miss knowing that your family will be taken care of in the event of your passing, you can purchase your own private life insurance plan.

By picking and choosing from all of these various these freelance insurance plans, you can give yourself the same kind of benefits you would have had as an employee.

Insurance Resources for Freelancers

Insurance is a vast and complex topic; Freelance insurance that might be perfect for one business or individual might not be so good for another. Below are some resources that can help you navigate the world of insurance:

The Freelancers Union: This US-based group is devoted to supporting freelancers across all parts of their career. One way they help people is assisting them with navigating insurance.

BECTU: A media union based in the U.K. It offers affordable media freelance insurance. If you have employees, this page can help you find small business health insurance.

Professional associations or unions: Several of these places offer group insurance plans. You can also check with business groups or your local chamber of commerce.

Freelance Insurance: Conclusion

The answer to the question of  “do freelancers need insurance?” is a tricky blend of “yes” and “no.” It depends on where you are based, the size of your business and your possible financial liabilities.

There are also plenty of situations where you will need to strike the right balance between cost and risk. As this article demonstrates, there are plenty of insurances you don’t have to have but really ought to have.

Once you’ve covered the mandatory insurances (particularly healthcare in the US), a good first step is to get a quote for a combined business/freelance insurance policy, which can typically protect you from lots of risks for a relatively small amount of money. How much you set out to protect yourself beyond that is an individual decision, and one that tends to evolve and change based on the people who depend on you.

EDITOR’S FOOTNOTE: Ironically, while this article was waiting in my queue to be edited, I received an email from an insurance company informing me that they’d placed a moratorium on new policies due to the (then) impending arrival of Hurricane Florence. This is a really important reminder that insurance isn’t something you should rush to sort out at the last minute. When it comes to insurance, the last minute can be too late.

IMPORTANT: This article is by no means an exhaustive list of all the types of insurance out there, nor is it intended as legal advice. Best efforts have been made to ensure factual accuracy, but laws and requirements can change. When in doubt, seek professional legal advice or contact an insurance agent or broker.

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