As a freelancer, you are totally responsible for yourself. The autonomy that this gives you is one of the main reasons people decide to go freelance. Being in control of your work is important for positive mental health.
But the flip side of autonomy is that you are also responsible for all the bureaucratic parts of running a small business too. You need to keep records and pay your taxes. And you are also responsible for managing risk within the business. That involves your approach to investing in the business, health and safety and also managing risk through insurance.
Do I need insurance as a freelancer?
Depending on the nature of your work some insurance will be mandatory and others will be optional. There are also specialised insurances for particular professions, for example architects, ecologists, therapists and medical professionals.
Below we list the main groups of business and personal insurance that most freelancers will need to consider.
Professional Indemnity
If your clients could potentially suffer a financial loss from your advice or service then you should get professional indemnity cover. If you are contracted by larger organisations, they will usually require a minimum level of professional indemnity cover. To get quotes and assess the level of this insurance you might need see this guide to professional indemnity insurance from Nimblefins.
Public Liability
Do clients meet with you in your place of work? Even if you work from home and clients see you there, then you will be liable for any accidents clients have on your premises. For example if your floor is slippery or you have uneven paving in your path, your client could potentially injure themselves and sue you for damages. You need to decide whether public liability insurance is relevant to you, but be aware of the potential consequences and work to reduce the chance of accidents if you decide not to take this cover.
Critical illness and income protection
The other thing about being totally responsible is that you’re on your own if you get ill. Unless you make provision there is no sick leave and no sick pay. Make sure that you have a contingency plan in place. That may be savings, or a supportive spouse or family member. If those back-ups aren’t available then it’s strongly recommended that you get insurance cover.
Life Insurance
What if the worst happens? If you have dependents then you should think about getting life insurance cover. Depending on your age, this cover usually doesn’t cost as much as you’d think. Freelancing can be precarious and it can take a weight off your mind to know that your family will be provided for if anything was to happen to you.
Vehicle insurance and equipment
If you use a vehicle for your work then vehicle insurance is mandatory. You should also declare in your insurance application the extent to which the vehicle is used for work purposes. Failing to specify that the vehicle is used for work purposes could make your policy void.
Could your business function if your professional equipment or tools are stolen or destroyed? Could you easily afford to replace them? If not make sure that your business insurance fully covers the replacement value of those items.
Tax investigations and IR35
A routine tax investigation can take up a huge amount of time and energy. If you primarily work for one or two clients, or are not a perfect fit for HMRC’s definition of self-employment in some other way, then there may be a danger of an IR35 investigation. This can be complex and time-consuming. IR35 insurance provides expert advice and support and also covers the tax bill if that’s how it concludes.
Freelance freedom is truly awesome. Don’t let the boring bits bog you down. Take care of it now with the right mix of freelancer insurance to give you peace of mind and long-term business and personal sustainability.