Making the decision to become self-employed is admirable because of the risks involved with starting your own business. If this is a career decision you are currently deciding on, we want to help you with reducing the risks you will face every day.
One of the easiest areas to overlook, when going into business for yourself, is insurance – essential if you want to succeed and survive as a freelancer. Everyday risks, like accidental damage to a client’s property, can threaten your professional survival because a lawsuit or claim demanding compensation from your negligence can be financially damaging.
Investing in an adequate insurance policy that covers you from unfortunate incidents is well worthwhile if you want to avoid damaging your professional reputation and gain more clients.
The following types of insurance covers will be of interest to you if you are considering self-employment. It is recommended that you take out a policy with these types of cover before you begin trading to reduce your risk claims.
Legally required cover
There are two types of legally required insurance:
- Employers’ liability insurance
- Commercial motor insurance
If you are a freelancer, employers’ liability insurance may not be necessary when you start trading. However, as your business starts to grow, you will need to employ people to meet customer demand. It is at this point you will need a policy to cover the cost of compensating employees who are injured or become ill through work.
Commercial motor insurance, on the other hand, is required if you are going to be using a commercial vehicle to conduct your business to at least cover you for third-party, fire and theft claims.
Optional cover you should consider
Although the following types of insurance cover are optional, you really need to consider policies that best suit your business’ operations and the risks it might need protection against.
Liability insurance for self-employed workers covers the cost of compensation claims to the public (anyone external to the business, excluding employees). The types of claims that this insurance covers are:
- Personal injuries;
- Loss of/ damage to property;
Example: if you are a freelance painter and decorator and you accidentally flick or spill paint on a client’s property, they could claim compensation from you to repair or replace that item, which was damaged through your negligence. Public liability insurance will cover the compensation costs of a claim made against you.
This is a very popular type of insurance policy for self-employed workers who work at different site locations, such as professional painters and decorators/ electricians. It can also cover incidents that occur on your own business premises, as well as at off-site events where members of the public might attend.
Note: some contracts with clients can include a condition that requires you to have public liability insurance in place in order for work to commence.
Professional indemnity insurance
If you work on a consultancy basis then you should take out a professional indemnity insurance policy to cover the costs of compensation to your clients if something you’ve advised them to do causes them to lose money.
If your profession is part of a regulated industry then it is possible that your regulatory body will require you to have this type of cover.
Legal expenses insurance
It is worth taking out legal expenses insurance if your business carries out activities that aren’t covered by professional indemnity or public liability cover if you need to pursue legal action or defence.
It pays for all of the legal costs involved in a case and can often come with legal advice and aid.
Other types of protection
There are a variety of other insurance policies that self-employed workers can take out. To manage your risk effectively, you should look at your business’ operations and see where compensation claims and costly problems might arise. From there you can assess what level of cover you will need and begin finding the best deal on your premium.