Freelancing allows you more control over your day-to-day work, allows you to increase your personal earnings, and allows you greater agility in your business practices. However, freelancing also radically increases your professional liability.
It happens more often than you might expect: a disgruntled client taking legal action against their freelance partner. To protect yourself from devastating lawsuits, you might need to consider the pros and cons of acquiring business insurance.
Enjoy Greater Professional Security
There are many different types of business insurance that a freelancer might benefit from, such as:
- General liability insurance protects against common accidents in the workplace.
- Professional liability insurance protects against claims of property damage or personal injury.
- Cybersecurity insurance protects against the financial fallout of data loss.
- Business interruption insurance protects against disasters that might prevent you from doing your job.
- Commercial auto insurance protects any vehicles involved in freelance services.
- Commercial property insurance protects any equipment used in business.
- Intellectual property insurance protects a freelancer’s intellectual property rights.
You might consider what types of insurance coverage would increase the security of the income you generate through your professional services.
Attract Bigger Clients
An increasingly common encounter in the world of freelancing is a demand from prospective clients that any freelance partners come equipped with business insurance.
For clients, business insurance is an attractive resource; it demonstrates that a freelancer understands their professional liability and has taken intelligent steps toward reducing their risk and protecting their clients.
Clients who expect their freelance partners to acquire business insurance usually do not contribute in any meaningful way toward its cost.
However, the types of clients who require business insurance usually offer contracts that make the expense worth a freelancer’s while. If you are interested in pursuing relationships with much larger clients, you might use business insurance as a hook to attract them.
Avoid Litigious Clients
While you are attracting larger and more lucrative clients with a business insurance policy, your insurance coverage should also scare away clients who might otherwise be a professional pain.
Some clients use freelancers in bad faith, hoping to take easy winnings from a defendant who lacks the resources to protect themselves.
However, many business insurance policies will provide support to a freelancer in legal battles. Thus, litigious clients might be disincentivized from pursuing relationships with you once you have business insurance, saving you time, energy, and money.
Maintain Professional Reputation
A lawsuit is a devastating blow to any business, but it can be particularly hard on a freelancer. Not only are freelancers less likely to have the financial resources to manage litigation, but legal trouble is remarkably bad for a freelancer’s professional reputation.
A pending lawsuit might compel current clients to seek other partnerships with freelancers that have not potentially committed grievous wrongs in the course of business, and prospective clients are unlikely to forge a new relationship with a freelancer known to be involved in some kind of litigation.
Business insurance can help protect your reputation as a freelancer, allowing you to continue doing the work you love. Depending on the type of coverage you acquire, business insurance should make receiving financial compensation or defending your business against accusations much faster and quieter.
Maintain an Ongoing Cost
For the most part, obtaining business insurance coverage as a freelancer is advantageous, but there is one notable downside that tends to scare most freelancers away: cost.
Freelancing can be lucrative, but many beginning freelancers have hardly any budget to spare for additional business expenses, and established freelancers might be reluctant to spend any more of their earnings on business services than they absolutely have to.
Indeed, business insurance is an ongoing cost, and ultimately, it is up to you to determine whether that cost is worthwhile.
In some industries, clients might not demand insurance from freelancers, so maintaining a policy might have less financial benefit. Then again, it is possible to find business coverage for as little as about $20 per month in some cases, and those expenses can be deducted from annual taxes.
You can use tools offered through the Freelancer’s Union to better understand your options and make your decision about business insurance.
There are many things to love about being a freelancer, but making major administrative decisions — like whether or not to acquire business insurance — might not be one of them. In most cases, business insurance is an invaluable resource, so you should talk to an insurance provider today about the options that suit your freelance business best.