Who Needs Self-Employed Business Insurance?
So you’ve joined the millions of self-employed people and started your own business (or you’re thinking about it).
Congratulations on your new freedom and following your dreams!
As a small entrepreneur, you’re freelancing, independent contracting, or otherwise controlling how you do business. You get to decide when you work and who you work for and with.
And the benefits continue to expand from there.
You also have the responsibilities of running your business, like payroll and overhead.
Oh, yeah. And you’re the one responsible for anything that goes wrong on the job.
That’s where self-employed business insurance comes into the picture. It’s not necessary for every entrepreneur. But for some self-employed business owners, it quickly becomes essential.
Does your business fall in this category, and if so, what kind of insurance should you carry?
We have the answers to all your questions here in this self-employed insurance guide.
The Most Common Types of Business Insurance
Some business owners need the basics, while others need almost every policy under the sun.
For instance, a surgeon who owns a clinic will need a lot more coverage than a freelance writer.
What kind of insurance does your self-employed work require?
Categories of Business Insurance
Check out these common types of business insurance and what they cover.
Then, you can make an informed decision on whether the coverage might be beneficial for you.
By far the most popular type of business coverage, general liability insurance covers almost everything the average entrepreneur might need.
It’s also something other businesses often require you to have before they’ll work with you.
“General liability,” in short, means that the insurance policy keeps you and your business from being responsible for paying for any claims levied against you. If someone sustains an injury on your property or your product causes them harm, the insurance policy covers the damages.
This policy is critical if you interact with customers (or their possessions) or sell a product.
You never know when an accident will happen, and a general liability policy takes care of personal and business property damage and other accidental liability coverage.
One more thing this policy includes is slander. If someone sues you for libel or slander, and you have to pay compensation, your insurance covers the cost.
Professional liability insurance, also called errors and omissions insurance, is there to protect you if you make a mistake in your business.
General liability covers physical injury or damage, but professional liability steps in when a financial loss occurs.
As an expert in your field, people come to you for advice. Professional liability insurance protects you if you gave your client a service that they claim was negligent, or you misrepresented them and they lost money or suffered harm.
In the medical field, you may know this type of coverage as medical malpractice insurance.
Not everyone needs a professional liability policy. However, it’s a wise investment if your self-employed business is contract-based or you’re dealing with large amounts of money.
Consultants, architects, accountants, real estate brokers, lawyers, and doctors are a few of the professionals that these policies aim to protect.
Business Owner’s Policy
Similar to a general liability policy but even more substantial, a business owner’s policy (BOP) insurance is a combination package. These are individualized and can include multiple coverages.
The benefit of a BOP is that you get all the coverage you need in one policy for a reduced premium.
Typically, most insurance companies include, at a minimum, general liability and property insurance. However, you can add more coverage if you think it’s necessary, such as commercial property insurance.
As an example, if your business is prone to theft or you’re a restaurant owner with food that can spoil in an outage, you can add crime or spoilage.
It’s an insurance cost that could be well worth the few extra dollars.
Workers’ compensation insurance isn’t an option for many businesses — it’s a requirement.
The laws vary based on the state you’re doing business in, but if you have four or more employees, you’re most likely going to need this coverage.
If your business is just you, you don’t need to worry about workers’ comp policies.
But if you have employees or hire contractors, subcontractors, or independent contractors, they’re acting on behalf of your business. While they are, you need to cover them under your workers’ comp policy.
Commercial Auto Insurance
Does your business involve driving on the clock?
A commercial auto insurance policy covers any damages due to accidents in a vehicle while it was used for business purposes.
Rideshares and delivery services would consider this coverage essential. Your basic auto policy might not cover claims if the driver or rider was injured in the line of business. If your self-employed work involves any transportation, you may need this policy.
Any, All, or None?
Business insurance isn’t necessary for everyone. Whether you should have any or all these policies is up to you and your line of work.
But there is one type of coverage every self-employed business owner needs:
Taking Care of Your Health With Insurance
Protecting your business when you’re the owner means taking care of yourself, too. Without a few basic insurance policies, you’re less likely to go to the doctor and deal with preventative issues.
Everyone should have at least one health insurance policy, even if it has a high deductible, so your premium is affordable. Today, most insurers include wellness care for free or low cost.
As a small business owner, you can’t afford to get sick. But if you do end up with something worse than a common cold, the quicker you get treated, the faster you’re back on your feet making money.
Wellness visits, like annual blood work, diagnostic screenings, vision tests, and dental checkups, prevent many serious conditions from sneaking up on you.
And if something major happens, sending you to the hospital or multiple doctors, health insurance is a buffer between your medical bills and your bank account.
Small business owners can get coverage through the Healthcare Marketplace.
Other Insurance Policies to Consider
Health insurance is one of the most crucial policies you can carry. But we recommend two other important types of personal coverage, as well.
Do you have a family that relies on your income to help put a roof over their heads?
Would you be leaving behind a lot of debt if something happened to you today?
Is there someone you want to take care of financially when you’re not around?
If any of those answers are yes, you should have a life insurance policy. Maybe you just need enough to cover your funeral expenses, or perhaps you want to ensure your family has enough money to continue their current lifestyle.
Life insurance replaces your lost income when you’re gone. You can find whole life policies, which tend to be expensive because they stay effective as long as you’re alive. But most people are safe going with term life coverage.
Term life is an insurance policy that provides coverage for a specific period. Because it has a beginning and end date, it’s less pricey than whole life insurance.
You can get more coverage for an affordable rate if you opt for the term instead of whole. And while you’re building your empire, you’ll be able to plan for your family’s inheritance after your term coverage expires.
So, life insurance takes care of your family when you’re not around.
But who will take care of you and them if you’re alive and unable to work for a while?
That’s where disability insurance comes into play. It’s an insurance policy that pays you part of your income if you’re injured or ill and out of work.
There are two types of coverage: short-term and long-term.
Short-term coverage is cheaper because it will only pay your benefits for a year or two (depending on the policy).
Long-term costs more, but it gives you the peace of mind of knowing that you’ll have an income for anywhere from ten years to age 65.
The right insurance products prevent you from worrying about how you’ll keep a roof over your head and cover your medical expenses.
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Does Your Business Need Insurance?
Before you head out and talk to an insurance agent, let’s run through the most common types of self-employed businesses and the coverages they should carry.
Each type of independent worker has different risks they take in their job.
Freelancers in the writing and art world offer a service, whereas someone selling a product takes on another risk level.
Knowing your level of risk gives you the information you need to decide what self-employed business insurance you should carry.
Examples of Risk Levels
Let’s start at the most common risk level.
Every business owner can suffer from financial loss due to injury or illness. At this level, you should have health insurance, life insurance, and disability insurance.
The next risk level is property damage.
Is your office in your house?
Renters or homeowners insurance is a must to protect you from fire, flood, and other types of damage. And if you interact with clients on your or their property, general liability insurance is your next necessary policy.
Taking it up a notch, are you an expert in your field? Do clients come to you for advice or help?
If you provide professional services for a fee to a customer, you’ll need professional liability insurance. This will cover your legal expenses and liability in the event of a data breach or negligence claim.
Business interruption insurance is another risk. When you’re unable to conduct your normal daily operations because of a disaster, this additional policy steps in and pays your income.
For example, a restaurant owner of a building that gets destroyed in a fire can rebuild with property insurance.
But their loss of income isn’t covered by disability because they’re not injured or sick. Business interruption insurance saves the day in this case.
Where to Get Insurance
Now that you have a clearer picture of the kind of insurance policies you need, it’s time to start shopping.
Of course, where you shop depends on the insurance you’re looking for. For health insurance, millions of people use the Healthcare Marketplace. You’re able to get affordable policies by using your tax credits.
However, the open enrollment dates are only from October through December. If you miss the deadline, you may have to wait until next year to get insurance.
Going to the Source
As a sole proprietor or self-employed owner, you can contact a salesperson directly for any type of insurance. They’ll give you an insurance quote, and your policy can take effect within days.
But this is time-consuming if you’re policy shopping for the best rates and coverage.
You could always hire a broker. This takes the stress of contacting multiple companies out of the picture. The broker works with you to determine your needs and then gets the quotes for you.
Be aware, though, that brokers often charge fees. If they get paid on commission, they likely aren’t looking for the lowest rates, or they’ll try to upsell you.
Using a Gig Worker Membership
When working for an employer, you get cheaper insurance and auto rates because of the volume discount.
As a member of a gig work company like Gigly, you can take advantage of these lower rates, too.
Gigly partners with the Alliance of Gig Workers to provide its members with competitive rates on multiple insurance options. If you’ve found it hard to afford the right coverage — this is a lifesaver.
Bundling your policies with companies like Geico is another way to save as a gig worker. You get better rates when you have multiple types of coverage, like homeowners, auto, and general liability, through the same insurer.
What kind of self-employed business insurance do you need?
The answer is all in the peace of mind you want and the risks you’re willing to take each day.
Health insurance, life insurance, liability … the coverage options seem like they’re endless. Ultimately, the kind of insurance coverage you carry is up to you and your business use.
With this guide, you can make an informed decision about your insurance needs and the places you go to get them filled.
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