You finally did it — you’ve decided to strike out on your own and work for yourself.
First of all, congratulations! Making that leap to do your own thing can be scary, but also extremely rewarding. After all, you’re the only one responsible for what you do — meaning that you’re in control of your own success.
You’re going to put a lot of hard work into your business. But here’s the thing — unless you’re properly protecting that hard work, a single accident or claim could put everything at risk.
Which is why, when it comes to the question, “Do I need self-employed insurance?” the answer, most likely, is a resounding yes!
Just because you work for yourself doesn’t mean you’re immune to lawsuits and claims from clients. And whether you’re a solo accountant or you work as a handyman, you’re likely exposed to the same kinds of risks and liabilities as a larger business in your field.
In fact, the risk may be even more pronounced for you, because you’re the only one responsible for your business.
Let’s say you’re an accountant, and you haven’t been getting a lot of sleep, so as a result of your fatigue, you inadvertently make a mistake on a client’s income tax return.
Or maybe you had to take a few weeks off from work due to illness, and when you went back to work, you tried to rush a few projects so you could catch up on your lost income. Unfortunately, the rush jobs caused damage, and the customer wants you to pay for what happened.
That’s where business insurance could come in handy, as it can protect you financially should you be accused of negligence or causing damage to a customer’s property.
Even if you do things perfectly, you could still be sued by a customer or client who claims you didn’t do your work correctly. The odds are good that it may happen to you; in fact, it’s estimated that within the past 10 years, approximately 43% of small businesses have been threatened with or involved in a civil lawsuit.
Those definitely aren’t odds you want to take on!
If you work from home, you may think your homeowners insurance policy would cover you in case of accidents or damage to your home-based business.
Take a look at that policy again — you’ll likely find that your homeowners insurance policy won’t cover any losses that your business encounters if, say, your home office is damaged in a storm.
Bottom line: If you do any work at home, make sure your work is protected with self-employed insurance.
If you get sued — say, for accidentally damaging a customer’s property or making a mistake on a project — self-employed insurance can pay for the costs of damages, as well as attorney’s fees for defending you (up to your policy limit).
But that’s only if you have insurance.
Without insurance, you would have to pay for those damages out of your own pocket (not to mention the attorney’s fees).
Those expenses could be enough to put the future of your business at risk, and if you had to dip into your personal finances to pay for the damages or lawsuits, it could put a strain on your family’s finances.
Depending on the line of work you’re in, you may need to carry a license or certification to work with customers. And many times, you need to show proof of insurance coverage to get that license or certification.
One example of this requirement is a contractor’s license. In most states, if you’re doing work on a project that’s over $1,000 in value, you’re required to have a license (even if you’re just doing a side gig as a handyman). To get that contractor’s license, your state may require you to submit proof of general liability insurance, along with your application.
No matter what type of work you specialize in, you probably want to show customers that you’re a trusted expert who will do a great job on their projects.
One of the best ways to show that may be — you guessed it — carrying self-employment insurance.
Having an insurance policy can show that you take your work seriously. It also helps customers feel reassured about working with you because they know if anything happens, your insurance policy likely can make them close to or whole again.
Also, if a potential customer is trying to decide whether to work with you or someone who doesn’t have insurance, having that policy could be the deciding factor for them to choose you!
Whether you’ve just started working for yourself or you’ve been self-employed for a few years, business insurance is a critical component to protecting your hard work. After all, there’s no telling where your business may take you…
So don’t let a single accident or lawsuit stop you from achieving your big entrepreneurial dreams!
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
*Harborway Insurance policies are underwritten by Spinnaker Insurance Company and reinsured by Munich Re, an A+ (Superior) rated insurance carrier by AM Best. Harborway Insurance is a brand name of Harborway Insurance Agency, LLC, a licensed insurance producer in all 50 states and the District of Columbia. California license #6004217.