When starting a freelance business, many people don't think of themselves as contractors. On the contrary, those who work for clients under a contract to complete a job within certain parameters can be considered contractors. Many freelancers may not think they need insurance at all. Unfortunately, freelancers have more to lose than they think.
Many freelancers work from home using a laptop or other computer. Computers alone are expensive to replace, and those costs are even steeper if you use the device to create items for sale. Loss of any item you use to make money may have limited to no coverage under your home insurance. Contractors insurance can provide compensation for work-related tools and items lost due to such incidents as fire, smoke, lightning, theft or vandalism.
Liability insurance as offered by home insurance will not cover any liability attached to your freelance business. Personal liability only covers bodily injury and property damage claims that occur on the home's property, while contractors insurance combines liability coverages specifically for businesses. Liability insurance available under contractors insurance include the following options.
- General Liability applies if your work has a shop or a physical address, such as an office space. It provides compensation for claims of bodily injury or property damage a third party may suffer on the property.
- Professional Liability is liability specifically for businesses and protects the business (or freelancer) in the event of claims of professional negligence. Professional negligence refers to a mistake made on behalf of the professional (or freelancer) offering specialized services that results in a client's loss of money. Freelance IT consultants, for example, heavily benefit from this insurance.
How Much Is Contractors Insurance?
The price of contractors insurance depends on several variables. First is the type and amount of coverage. General liability for freelancers, for example, costs around $400 a year (around $33.33 a month). If you're a freelance handyman or physical contractor, you may want higher liability limits. If your freelance work concerns expensive or valuable equipment, you may benefit from higher property coverage limits.
Also keep in mind that items and equipment related to your work may not be covered by your personal auto insurance policy if lost or damaged in transit. If your freelance work involves a work vehicle, you may need commercial auto insurance and inland marine insurance to cover the vehicle and any equipment you need to transport from loss or damage.
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