Before 2020, entrepreneurs moved into freelancing to blaze paths independent of employers. As freelancing gained popularity, it also became more bureaucratic.
For example, self-employed hairstylists, pressure washers, and writers must obtain business licenses. They must obtain insurance too.
Moreover, independent contractors across the board must pick a tax structure such as partnerships, LLCs, and corporations. If you remain a solopreneur, your tax structure rolls into a sole proprietorship.
Therefore, freelancers must set aside a portion of their income to cover quarterly estimated taxes, license renewal fees, and insurance costs.
Freelancers and Insurance
The average monthly cost for insurance ranges between $300 to $500 for freelancers plus the costs of health insurance.
Understandably, that’s a large amount for new entrepreneurs. The good news is that it’s not necessary to obtain every policy right from the start. Once your operation grows, your income should grow with it. Thus, insurance costs become more bearable.
We outline how freelancers can benefit from having insurance.
1. Protection Against Income Loss
The main purpose of insurance for businesses is to protect against loss of income. Some states prevent plaintiffs from filing frivolous lawsuits. Others let all lawsuits go through. If you live in a state that allows the latter, it makes legal fees more expensive.
An expensive lawsuit can wipe out any financial gains that freelancers earn. You can always start over after regaining your financial footing but it will take time.
For a more in-depth look at self-employed insurance options, check out Gigly.
2. Protection Against Errors
Doctors and professionals benefit from purchasing malpractice insurance. If doctors give a patient the wrong medical advice or they misdiagnose them, the patient has the right to take them to court for damages.
Some cases have found that the medical professional was negligent. In other cases, it’s an arduous process that doctors must go through to prove their innocence.
Freelancers can experience these types of lawsuits too. That’s when Errors and Omissions insurance comes in handy. You’ll still undergo the legal process but the E&O insurance will protect your assets, especially if you come out on the winning end.
3. Protection Against Business Interruption
Business owners in the United States experienced the most impactful interruption in 2020. Before then, business owners experienced interruptions on a smaller scale. Interruptions include:
- Wind damage
Before obtaining a business interruption policy, read the fine print. If a covered event occurs and it interrupts your business operations, the policy will reimburse losses such as:
- Lost income
- Relocation costs
- Loan payments
The coverage allows you to regroup and start your business operations again with minimal loss.
4. Protection Against Illness
Freelancers get sick too. They also require dental care. Obtaining health and dental insurance keeps freelancers healthy.
Getting sick and not earning money turns into a bad combination fast.
It’s tough to work through a tooth that needs a root canal or gum pain caused by periodontal disease.
When insurance doesn’t cover your costs 100%, it does help defray them to a more affordable level.
5. Protection Against Defamation
The internet has become a digital version of the Wild, Wild West. If you find yourself in the middle of a media firestorm or defamation case, insurance policies help you deal with the financial fallout.
Since you represent yourself, your clients cannot help you if your work brings unwanted media attention.
6. Protection in Case of Disability
Staying healthy is important for freelancers since it staves off disability. However, you might become disabled through no fault of your own.
If you find yourself in the middle of a vehicle accident, insurance helps you obtain the specialized care that you’ll need to rehabilitate. It will also help cover the legal costs associated with obtaining damages. Those with permanent disabilities can also benefit from government programs like NDIS plans. It helps participants access different support services that would help them continue their lives with more convenience.
7. Protection for Family Members
When you pass away, it’s a tough time for your family. If you make the probate process easier and leave behind some funds to pay for your funeral, it makes the grieving process a little easier.
All freelancers benefit from obtaining insurance on a human level. One day you will get sick, require dental work, and retire. Insurance protects you and helps you remain healthy to work. If you have a family, insurance protects them if you become disabled or pass away. Therefore, obtaining the right policies provides freelancers with many benefits.
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