More companies are outsourcing jobs to freelancers or independent contractors (ICs). According to the Bureau of Labor Statistics, the number of freelancers and ICs has grown dramatically in the last few years and is expected to continue rising.
Many freelancers and ICs themselves have failed to keep up with the times; these days you need commercial insurance more than ever, but few realize that without it, they’re setting themselves up for big risks. Contractors and freelancers essentially share the same risks as small businesses. Consider yourself a type of small business, and protect yourself as such.
As soon as you start freelancing or work as an IC, you need insurance. Essentially, every freelancer and independent contractor needs professional liability insurance, even sole proprietors, such as writers or accountants. Depending on your job, you may need other types of commercial insurance as well.
Freelancers and ICs are often considered experts. Most projects involve working with another business or individual, meaning that if a business loss results from a project done by an IC, he or she is financially liable for that loss and other resulting damages.
Several types of commercial liability policies are available for both ICs and freelancers, although what is needed depends on your line of work, job functions, and other factors (such as whether you see customers at your own place of business or drive a vehicle solely for work). These factors help determine what coverage is needed.
Types of insurance:
Professional Liability Insurance
Often referred to as professional indemnity insurance, and sometimes as independent contractor liability insurance, this policy protects against possible claims from clients, such as a costly mistake that the contractor may be liable for. It provides liability coverage in different amounts and helps cover costs of liability claims should the claimant prove contractor liability.
Product Liability Insurance
If you create products or items others will use, purchasing product liability insurance is a must. For example, a freelance computer software consultant is hired by a company to build software programs for them. Shortly thereafter, the software crashes, deleting all the information in the company’s database and potentially leading to multiple lawsuits on a number of grounds.
Cyber Liability Insurance
Cyber liability essentially provides protection against losses related to electronic storage – something not usually covered under regular commercial policies. This protects you if one of your clients and/or the client’s customers experience losses due to unintentional or purposeful negligence on your part.
For example, a freelance computer software developer builds a database for a company that stores sensitive, personal information on their customers. It’s hacked, and a customer’s identity is stolen. The customer could sue the company, and the company could, in turn, sue the freelancer for a number of things, such as loss of business, costs of obtaining new databases and security features, and more.
If you’re an IC or freelancer, discuss liability policies, as well as commercial auto insurance, physical premises liability, and other types of coverages with your agent, for your own peace of mind.