Freelancer? Why Your Home Owners Insurance Won't Have Your Back

Business.com / Strategy / Last Modified: February 22, 2017

Being a freelancer doesn't mean you are free of worries. Your freelance business is still exposed to risk - it's important to be protected.

Who wouldn't want to be a freelancer? You start your day when you're ready, and you end it the same way. You work in your pajamas when you want. You're the boss. As long as the money's flowing in, you've got no worries, right?

Well, not exactly.

What if you're a freelance web developer and the site you've built for a client crashes because more users visit than you expected? What if you're a freelance writer and the subject of an article files a libel lawsuit? A freelance photographer and someone in your latest photo believes you've damaged his reputation? A freelance accountant and you make a mistake on an audit or tax return?

If you work for a company, it likely has several types of liability insurance that can protect it – and you. But if you freelance, you often can't on your own.

And it's not just your freelance business that's at risk. Legal expenses – not to mention any award in a case – could drain your personal finances and put your family's future at risk.

Read: Does Your Business Insurance Need a Check Up?

And if you think your homeowners insurance will cover your freelance business, think again. Most policies specifically exclude claims related to home businesses. Luckily, freelancers have access to insurance that can provide assistance in most situations.

Following are three types of business insurance for freelancers and some examples of how they can help typical freelancers:

Business property insurance

Do you use specialized equipment for your freelancing job? Equipment such as desktop or laptop computers or tablets; cameras, specialized lenses, and tripods; or top-of-the-line scanners and printers – maybe even a 3D printer?

Read: Should Freelancers From a Business Entity?

If so, you could need business property insurance. Yes, your homeowners insurance includes personal property protection, which covers your possessions from certain perils such as fire and theft. But some policies exclude business equipment. Even if your policy doesn't exclude items used for business purposes, it could have strict limits on payouts for it – sometimes as low as $1,500 for all your business equipment.

You can schedule an endorsement for business equipment, but even that typically only doubles your coverage, which might not be enough. If not, a business property policy can fully cover your expensive equipment.

When you buy a business property policy, one thing to check for is whether your coverage is for replacement value or actual cash value. Replacement cost means you're covered for a new version of the equipment – regardless of its age. Actual cash value takes depreciation into account – your coverage is only for the current value of the property.

General liability insurance

If clients come to your home, or even if you have business deliveries made to your home, general liability insurance is a must. It protects you in case someone is injured on your property and it's judged to be your fault. Coverage can be used to pay for your legal defense as well as for damages awarded in a case.

Read: Business Insurance to Protect Your Startup

Standard homeowners insurance typically includes liability coverage, but most providers don't cover incidents related to a home business.

How some freelancers could use a general liability policy:

Accountants. If a tax client brings you a box of receipts and breaks an ankle because of a loose step to your house, he or she could sue you for medical costs, pain and suffering, and lost income. This also could happen if a delivery person suffers an accident while bringing you supplies for any type of home business.

Alterations specialists. If you're measuring trousers on a customer who falls off an unsteady stool, you again could be sued.

Photographers. This coverage could help you in the studio if someone gets injured or in the field if you take a photo that someone says tarnishes his or her reputation and sues you for slander.

Writers/editors. General liability protection could help here if you face a libel lawsuit. Many clients will require you to have this coverage before they sign a contract for your services.
Errors and omissions insurance

This applies especially to anyone who performs a consulting role. If your advice isn't sound, you could be sued for its failure. Or if you produce a product that is flawed, you again could face legal troubles. Again, it will help with legal expenses and awards.

Coverage is a must for website developers or IT consultants – think data breaches, for example. It also could help an accountant who makes a mistake or a caterer who serves tainted food at an event.

Overwhelmed by the potential for trouble? Don't be. A licensed agent can help you sort through the risks posed by your business. In some cases, you can package coverages in a customized business owner's policy.

The 'free' in freelancing will never mean 'risk-free' or 'rule-free,' but with the right business insurance for freelancers, you can make it stand for worry-free.

This article was contributed by Carrie Van Brunt-Wiley, editor of HomeInsurance.com.

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