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6 Reasons You May Need Freelance Business Insurance

4-minute read

Freelancers - like this photographer on a set - should protect themselves from lawsuits with freelance business insurance.
Mariah Bliss

Mariah Bliss

29 May 2020

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Imagine this. You just started your freelance business, and everything is going swimmingly. You’ve built a strong client base, and best of all, you love your work. Then suddenly a client expresses how unhappy they are with a project and decides to sue you for a mistake they claimed you made.

The next thing you know, you could potentially have a lawsuit on your hands.

Sound out there? It’s not. About 43% of small business owners say they’ve dealt with lawsuits or the threat of one. With 57 million people freelancing in 2019, a lot of lawsuits are being dealt out across the country.

So, why is it that most freelancers don’t talk about the importance of getting business insurance, including general liability and professional liability coverage?

As a fellow freelancer, here’s my take: we optimistically think a lawsuit would never happen to us. After all, who would go after “little old me?”

Sadly, almost anyone can. We live in a society where lawsuits are increasingly common, so it’s critical to protect ourselves if we own a business, including a sole proprietorship.

Whether you’re a freelance writer, designer, photographer, bookkeeper, or programmer (the sky’s the limit), you likely want to have business insurance before you start working with clients.

Not sure how a policy could help you? Here are 6 realistic scenarios you can easily face — and how business insurance could help protect you along the way.

1. You can make a mistake. Anyone can.

No matter how talented you are, any freelancer can make an honest mistake. After all, we’re human, and it happens to the best of us. The problem is, some of these mistakes can blow up with clients.

Here are a couple realistic scenarios to consider. You’re a photographer hired to capture perfect photos of a bride’s wedding day. After the event, your computer crashes, destroying all of your work. Suddenly, you realize you’ve lost all of the photos from the bride’s wedding day—and it’s impossible to get them back. When the bride finds out, she becomes enraged and takes steps to sue you for damages.

Or how about this one? You’re a journalist who interviews a doctor for a news article. During the interview process, you misunderstand and accidentally misquote him in the article. The publication doesn’t require you to fact-check information with the doctor and goes to print right away. Unfortunately, the quote damages the doctor’s reputation, making him appear incompetent in his field. Later, he sues you over the mistake.

Even if it’s not your fault, you may need to hire a lawyer to defend your case. These fees can be costly, but if you have professional liability insurance, your policy can help cover the costs up to your limit.

2. A client can want a refund.

Look, it can be hard to make some clients happy. I know I’ve had a couple clients go back and forth with me for months, requesting small edits to my writing.

But what happens if someone sues you because they think you delivered a sub-par product?

The truth is, any client can accuse you of negligence in your work, especially if you don’t have clear expectations set in a contract ahead of time. If the client has unmet expectations, and especially if they lose business, they can easily get angry and go to a lawyer.

Mull over this example. You’re a marketing strategist who delivers a quarterly plan to a client. After executing the plan, the company experiences a significant loss in business that they attribute to the new marketing message. They tally up these costs and accuse you of damaging their revenue.

With business insurance, you may be able to recover without dipping into your own personal and business accounts. Liability insurance can help cover the costs of a lawyer, and possibly some of the damages if you’re found guilty.

3. Many contracts have an indemnification clause.

How closely do you read your freelance contracts? I know I’ve breezed over a few. Many of them include an indemnification clause. This means that you could be held financially responsible if the company you work for gets sued for something related to the work that you did. Your client could actually turn to you to recover some of their financial losses.

For example, let’s say you’re a freelance photographer who captures images for the news. You mistakenly photograph the wrong person, making him look like a suspect of a crime. After publishing your images, the person sues the news outlet for libel. After winning their case and costing the publication thousands of dollars, you find out you’re on the hook to pay for the damages.

Unfortunately, if you’re like most photographers who don’t have business insurance, the costs could be enough to put you under.

4. It’s easy to commit libel or slander.

If you’re like most freelancers, you’ve probably had a client withhold pay. Sadly, this happens far too often. When this happens, it’s tempting to vent to friends, or worse, let loose on social media, your blog, or in online forums.

But here's the deal. If you vent and the client finds out, you could potentially be accused of libel or slander. And the costs can be huge. Fortunately, with liability insurance, you typically can receive some protection, including help to pay for the costs of hiring a lawyer.

Musician, anyone? Whether you write jingles for commercials or you’re recording for a label, the creative industry is high risk. It’s tough to come up with completely new riffs. But it’s not just musicians who are at risk for copyright infringement; it’s anyone who does creative work, which can include writers, designers, and artists.

If you accidentally design a logo or write a tagline that’s a little “too close” to someone else’s, you could potentially get sued—even if you were unaware of the company’s brand. Getting professional liability insurance can give you peace of mind, knowing you’re likely to be financially protected if you get involved in a case (up to your policy limits, of course!).

6. Accidents and injuries are common.

Last but not least, accidents can happen to anyone, including freelancers and their clients.

If you invite a client into your home office, you’re especially at risk. In just minutes, you can spill tea on their brand new laptop and get sued for damages. Worse, your client could trip over your home office rug and hurt themselves, potentially leaving you on the hook for legal defense fees and your client’s medical expenses.

Don’t think it can happen to you? It can.

The solution is simple. If you get freelance business insurance now, you can feel more relaxed and focused on your work. After all, you shouldn’t have to constantly worry about an impending lawsuit.

Just remember, as a freelancer, you’re a one-person show. No one else is out there to protect you, unless you get a solid policy. Fortunately, these days, insurance is fairly reasonably priced and typically far less than getting involved in a lawsuit.

Plus, if you get a policy, you can boast to your friends that your business is legit.

After all, you run a business. Isn’t it time to protect it?

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Mariah Bliss

Written by

Mariah Bliss

I love writing about the small business experience because I happen to be a small business owner - I've had a freelance copywriting business for over 10 years. In addition to that, I also head up the content strategy here at Simply Business. Reach out if you have a great idea for an article or just want to say hi!

Mariah writes on a number of topics such as small business planning, contractor insurance, and business licenses.

This content is for general, informational purposes only and is not intended to provide legal, tax, accounting, or financial advice. Please obtain expert advice from industry specific professionals who may better understand your business’s needs. Read our full disclaimer

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