One of the allures of gig work is the freedom to control your own destiny. But since that control has limits, proper insurance coverage needs to be part of the picture — possibly including a business policy.
You may not think about your small enterprise as a business, but people who work for themselves need to make sure they are protected against risk — and that means purchasing appropriate insurance coverage, says Shannon D. Farmer, a partner with the Philadelphia-based law firm Ballard Spahr.
Here's how to determine whether you need such coverage, and some tips on where to buy it.
Understanding the risks
We’ve written before about the need for the self-employed to have disability insurance and life insurance, but many gig workers don’t realize they might need additional insurance to protect against other types of risks.
“Risk doesn’t only mean the risk of injury or death — it can also mean the threat of legal issues,” says Leslie Tayne, founder and managing director of Tayne Law Group P.C. “The type of field you’re in will help determine which kind of business insurance makes the most sense for you,” she says.
For instance, gig workers who drive their car for work may want to consider commercial liability protection. If you’re simply going to and from jobs, your personal auto insurance will be sufficient. Tayne says. “But if you’re using your car more directly for work, including transporting clients or supplies, you may want to consider a company or commercial policy,” she adds.
For home-repair contractors, landscapers and even dog walkers, general liability insurance, which covers third-party bodily injuries and property damages, could be important, says Scott Holeman, a spokesman for the Insurance Information Institute. Say a dog walker lets a dog loose while in its care and the dog gets hurt or injured, the dog walker could be sued. There may also be situations where they could be considered negligent if a dog in their care hurts someone or damages property, Holeman says.
Meanwhile, for a freelance writer or photographer, professional liability insurance (also known as errors and omissions coverage) might be a good choice, to provide protection in the event someone takes legal action against you. “Not only can it cover damages caused by your negligence, but proof of insurance can help customers feel good about your work,” Holeman says. Depending on the professional, there may also be state licensing requirements, he says.
Identifying your insurance needs
People who work remotely often rely on their homeowners or renters insurance coverage to protect a home-based business. But this may not give you all the protection you need.
Things can be tricky when it comes to gig workers and property-related coverage. Generally, renters and homeowners policies exclude property belonging to the business such as technology, files, and equipment, but there are exceptions, so it’s important to look closely at a policy’s language and talk to your agent.
Next, you may have liability issues to consider. Standard renters and homeowners policies won’t protect a claim against your business if a client slips and falls while visiting your residence, for instance, because business liability is generally beyond the scope of such a policy. If you provide services directly to customers while in your home, such as tax preparation or hair services you may need specialized liability coverage.
To help determine their policy needs, The Hartford recommends gig workers ask themselves these questions:
— Do customers or clients come to my home?
— Do I keep inventory or supplies in my home or at off-site job locations?
— Would I lose income if I had to close my business because of damage to my home?
— Do I have employees working in or outside of my home?
— Do I maintain client or employee records on my computer?
The answers to these questions may suggest that your homeowners policy may not be enough to adequately protect you and that additional insurance could be warranted.
Scoping out your policy
How coverage is packaged can depend on factors such as the carrier, your state and the type of business you operate, says Madelyn H. Flannagan, vice president of agent development, education and research at the Independent Insurance Agents and Brokers of America.
A typical homeowners policy provides only $2,500 coverage for business equipment, which could leave a gig worker coming up short, according to the Insurance Information Institute. But you may be able to add an endorsement to your existing homeowners policy to add to the standard coverage for business equipment. You may also be able to buy a homeowners liability endorsement, though such an endorsement is generally available only to businesses that have few business-related visitors, such as writers, according to the Institute.
You might also consider an in-home business policy, which offers more comprehensive coverage for business equipment and liability than a homeowners policy endorsement, according to the Institute. These policies, also called home-based business endorsements, can be purchased separately from a homeowner’s policy.
There’s also a standalone business insurance policy that may offer even more comprehensive coverage and can be tailored toward your business, says Flannagan of the Independent Insurance Agents and Brokers of America.
Where to buy coverage
Many people may have an existing relationship with an agent or company for their personal insurance needs, so it’s worth asking about what business coverage options they offer. Using an existing relationship may limit new paperwork and could even get you a discount for holding multiple accounts with the same insurer.
A growing number of online business-insurance options also offer greater flexibility to this population of workers. Many gig workers, for instance, prefer to pay on an as-needed basis instead of annual because income isn’t guaranteed or consistent compared to a salary-based job, says Tayne the attorney. Their needs may also change more frequently based on the nature of their work, and many also prefer a more automated process, as opposed to talking to a human representative, she says.
“This is key to gig workers because time is money,” says Sofya Pogreb, chief operating officer of Next Insurance, which focuses on providing tailored insurance products to small businesses and the self-employed.
Digital insurtech companies, like Next Insurance, leverage emerging technologies including AI and machine learning to make data-driven decisions to provide more tailored products, coverage and risk-based accurate pricing for customers. This technology is also used during the servicing/claims process as well, Pogreb says. Digital insurtech companies may also be able to offer lower prices to consumers, in part because their overhead is generally less than a traditional insurer.
While certainly there is a cost to these policies, experts say the risk to not being properly insured is far greater. “Gig workers should be reminded that there is a higher level of personal risk working as a freelancer,” says Holeman of the Insurance Information Institute. “The bottom line as a gig worker is: Don’t put your career and finances at risk,” he says.