Most people never get to pursue their life goals and personal ambitions in their work. Many are tied to dead-end jobs or forced to work for meager salaries just to make ends meet. For a select few, however, breaking free from the chains of employer-based servitude becomes a reality.
Increasingly, those with a knack for something have found stable, full-time careers in the world of freelancing. Freelancers provide services and/or products to clients on an as-needed basis. For some, this means one-time gigs, while for others, it may be recurring work stipulated by a contract. At the end of the day, however, each freelancer works for his or herself, setting their hours, pay and standards.
The freedom that comes with freelancing can be liberating, but some rules may still apply. One such consideration is insurance: do you need liability insurance when working as a freelancer? We’ll answer that question below and help you make the right decision.
What General Liability Insurance Does
General liability insurance works just like many other forms of liability insurance. In cases where you may be at fault either directly or legally, this coverage can help protect your business.
The fact is that there are many situations in which you, as a freelancer, could be sued or held liable for damages. General liability insurance coverage is obtained by paying a monthly or annual premium to safeguard against a variety of potential worst-case scenarios.
In the event you are sued or otherwise taken to court, general liability insurance policies may pay the costs associated with the ruling (as well as any court fees). It’s important you select the right general liability insurance coverage as this can protect you and your venture from potential bankruptcy in the event you are found liable for damages.
When General Liability Insurance Is Needed
As alluded to above, GL comes into play when you and/or your proprietorship are taken to court over disputes. Rather than always being potentially one bad project away from financial insolvency, possession of a general liability insurance plan can give you peace of mind in knowing that you’ll be covered.
Not only is GL needed in these scenarios, but it may also be required to obtain lucrative contracts and projects. Many big companies and institutions require that freelancers possess some form of general liability insurance before signing any contracts. As such, having this insurance can open your freelance career up to a variety of new, bigger jobs that otherwise wouldn’t be accessible.
What Does Liability Insurance Cost?
In order to guarantee consistent coverage via general liability insurance, you must first learn how much a policy costs. Thankfully, most liability insurance policies for freelancers are quite affordable.
There are many different insurance providers on the market that can supply freelancers with coverage. In fact, there are a number of liability insurance companies that cater specifically to people who face the most liability in the event a project or job goes awry.
In most cases, a suitable liability insurance policy for freelance work costs less than one dollar per day. Ultimately, getting an insurance quote directly from a number of insurers is the best way to determine exact costs. The amount of coverage you need, what kind of work you provide, and several other factors can significantly impact the overall cost.
When Could I Be Sued?
One of the biggest questions any freelancer probably has about liability insurance relates to the broader situation: when exactly can a freelancer be sued? The short answer is: anytime.
While most clients are not going to waste time with frivolous lawsuits, the reality is that anybody can file a lawsuit if they have enough money and motivation. The most common reasons why freelancers are sued relate to the failure to deliver a time-sensitive project on time, the loss of important data and/or information, and the disclosure of sensitive client information forbidden in the contract.
In most cases and contracts, there is a statute of limitations stipulated that establishes a time-frame for the client to express dissatisfaction with the project’s results. While not 100% iron-clad in a court of law, adding this element to the broader agreement will likely reduce any frivolous complaints from being made long after services have been rendered.
Making a Decision
Whether you need general liability insurance is a genuinely open-ended question. If you provide relatively inexpensive work in small batches to a number of clients, then the chances of being sued are minimal – and even then, the verdict payout would almost certainly be manageable.
However, if you provide large-scale services to big-name clients, then the need for coverage increases exponentially. Being caught in a lawsuit claiming thousands, tens of thousands, or even millions in damages could ruin your life: having GL can protect you, your business, and your finances in these situations.
Ultimately, making the right decision may depend on how many clients you serve, how big your projects tend to be, and whether you believe the risk is sufficient enough to justify a GL policy.