Insurance Considerations for Freelancers, Entrepreneurs and Small Business Owners

Taking the leap to becoming a freelancer, entrepreneur or small business owner is huge. If you’ve recently done it, congratulations!

There is no doubt you have a long to-do list, but you need to make sure getting insurance is a high priority.

While becoming your own boss has many perks, it often also means leaving behind a company Human Resources department to handle all the little things – like insurance.

In order to protect yourself, your family and your business, you need to be covered with the right insurance policies.

Home/Office Insurance

If you work from home and have homeowners insurance that doesn’t necessarily mean your business is protected.

You need to check your homeowners policy, but it generally will not cover losses to your business should something happen to your house.

You can purchase home-based business insurance separately from your regular home owner’s policy.

There are a myriad of other types of insurance that may be more specifically tailored to your business dealings such as:

• Commercial package policies which often include worker’s comp.
• Business-owners policies which protect you if a customer comes into your place of business and has an accident.
• Data compromise coverage which safeguards you against hackers stealing personal information about you or employees.

Do you have an office outside of the home? Then you should have insurance such as commercial property coverage.

Health Insurance

Under the Affordable Care Act, you’re required by law to have health insurance.

Going uninsured carries a fine if you can afford coverage but elect not to buy it and don’t qualify for an exemption. In 2015, going uninsured may mean paying a penalty that is the higher amount of either 2 percent of your annual household income or $325 per person ($162.50 per child under 18). The maximum penalty per family using this method is $975.

Many people consider jumping into the freelancer/contractor/entrepreneur life but health insurance is often a large deterrent.

Dealing with both the cost and perceived headache of signing up for health insurance on your own can be enough to make you stick with working for someone else’s company.

But if you’re ready to strike out solo, you need to be sure to have adequate health insurance for you, your family and possibly employees.

If you’re a freelancer, the cost of health insurance can be a heavy burden on your bottom line, so it’s important to find the most affordable plan that also offers adequate coverage.

There may be a union you can join in order to get a better deal on health insurance coverage – like the Freelancers Union or National Association for the Self-Employed.

If you’re a small business owner with 50 full-time equivalent (FTE) employees or less, you can use the Small Business Health Options Program (SHOP) Marketplace to offer health coverage to your employees. Plans and costs will vary by state, but you can explore options on HealthCare.gov.

Keep in mind that you aren’t required to offer health insurance if you have less than 50 FTE employees. You can elect to offer insurance through the SHOP Marketplace if you would like, but there is no penalty if you don’t.

Disability Insurance

An often overlooked but imperative piece of your healthy financial plan is disability insurance. It’s especially important if you’re the family breadwinner or a full-time freelancer without a secondary income stream. If you’re unable to work, then your future income (your biggest financial asset) quickly disappears.

Fortunately, you have a couple of options: short- and long-term disability insurance.

Short-term disability insurance provides coverage for the first three to six months you’re out of a job.

Many companies offer this form of insurance, but if you’re a small business owner or freelancer it will be your responsibility to secure this coverage.

Long-term disability insurance usually won’t start until after you’ve been disabled for a three- to six-month time period, but it typically pays for as long as you are disabled.

This type of insurance often stops payments around the time you turn 65 (retirement age).

Life Insurance

If you’re young and single without debt or dependents you could probably get by without life insurance.

Alternatively, if you’re wealthy and your children are grown you may elect to take a pass too. But if you have someone that relies on you and your income or you have debt that a loved one co-signed, i life insurance is a good idea.

Life insurance will lessen the financial burden on your family if you pass away at a time when your income is needed to support them. It can also be used to resolve a debt that will be passed on to someone else if you die.

Know Your Liability (and Prep Accordingly)

Medical practices should have malpractice insurance and a lawyer may consider professional liability insurance.

But what about a more run-of-the-mill start up, freelancer or entrepreneur? Do you really need asset protection as a freelance writer?

You probably don’t need separate liability insurance, but you should consider forming an S corp or LLC in order to protect yourself against business debts and liabilities.

The Bottom Line

Setting yourself up with the right insurance is an important piece of the self-employed puzzle. So while you’re updating that every-evolving to-do list, make sure securing the right types of insurance is near the top!

#YouGotThis

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