The Gig Economy's Insurance Problem: Are Freelancers and Contractors Underinsured?

Most freelancers and contractors do not have all the insurance protection they need. Health insurance is not the only type of insurance that freelancers and contract workers need to buy. Being self-employed means having to worry about types of losses an employer would normally take care of. For instance, you may be uninsured by using a personal insurance policy for a car used for business purposes or you store inventory in the home or at a storage facility without adequate coverage. Even photographers and other types of creatives have business equipment worth hundreds or thousands of dollars. Let’s look a little deeper at some common types of business insurance that may be necessary for the type of work you do.

On This Page

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  Personal Car Insurance vs Commercial Car Insurance

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  Rideshare Insurance for Gig Workers

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  General Liability Insurance for the Self-Employed

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  Business Property Insurance: Work Tools and More

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  Home Business Riders and In-Home Policies: Will It Cover Inventory Too?

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  Cyber Insurance: Protecting Customers and Clients

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  Other Types of Business Insurance You May Need

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  Freelancer and Contractor Insurance FAQs

Personal Car Insurance vs Commercial Car Insurance

If you’re not sure if the usage of your car falls under personal or commercial insurance, look into it before you find out you’re not covered adequately. There is a gray area where certain accidents fall but for the most part, if you’re using your car regularly to travel to various job sites, transport goods or tools and equipment, conduct open houses, deliver food or shuttle people to appointments and to run errands, you may need commercial car insurance or at least a rideshare endorsement.

If your business owns the vehicle, you must buy commercial auto insurance. Self-employed individuals may or may not need commercial auto, depending on how they use the car. A regular commute does not require a commercial policy, which is usually more expensive than a personal-use car insurance policy. ^[1]

For example:

A graphic designer who works on-site regularly does not need commercial auto for the commute.

A realtor who visits various homes to attend open houses will need a commercial auto insurance policy.

Rideshare Insurance for Gig Workers

Uber encourages its employees to use their own commercial policy, however, Uber-Eats, Postmates or Doordash drivers and Uber or Lyft drivers do not legally need to buy a commercial auto policy. They would need a rideshare policy added to their personal auto policy to cover a small gap of time when they are not insured by their personal car insurance policy or Uber’s insurance.

Personal car insurance and the rideshare company’s insurance will not cover you when there’s no passenger in the car and you are driving between fares. ^[2]

Rideshare coverage will cover you while you’re in between driving passengers. Once you turn on your work app, you’re no longer covered by personal car insurance, but you’re not covered by the rideshare company’s coverage until you are assigned a job and are en route. While on call, only a rideshare rider has your back.

The Rideshare coverage deductible is also much lower than the rideshare company’s insurance deductible. ^[2]

For example:

You pick up someone and drop them off, all the while covered by the rideshare company’s insurance. You are waiting for another assignment and driving around or are parked somewhere and you get into an accident: Unless you have a rideshare rider on your personal auto insurance policy, you’re not covered by your car insurance and you’re not covered by the rideshare company’s insurance.

General Liability Insurance for the Self-Employed

If you’re in any type of trade where you run the risk of causing bodily injury or property damage, you will need general liability insurance. ^[3] For instance, if your work is done at home and you do not meet with guests for work-related meetings at your home or in an office, you will not need it.

However, if you do have an office and someone trips and falls there, you’ll need general liability coverage to pay for medical bills. If you work from home, you may be able to add a liability endorsement to your existing homeowners insurance, to cover third party injuries, if they are hurt while visiting you for business reasons.

For example:

You’re a freelance content writer and do your work from home and don’t meet with third parties who may get injured or experience damage to personal property. You don’t need general liability insurance.

You’re a yoga teacher and a student experiences an injury during your private session. You’d need general liability coverage to help pay for doctor visits and possible surgeries.

You work from home and often hold meetings in your home office. You’ll want to get a liability endorsement for business added to your homeowners insurance policy, in case they are injured while on your property. ^[5]

Business Property Insurance: Work Tools and More

Business property, or personal business property, includes everything from paperclips and staplers to the fixtures and equipment you use for your business. Business property can include:

• Office furniture

• Building (if you own the building where you perform business-related work and it is not your home)

• Computers

• Tablets

• Phones

• Vehicles

• Patents, copyrights, trademarks/service marks

• Inventory (more on this below)

Anything you have that is necessary for you to run your business may fall into the category of business property, and it should be insured with business property insurance. Otherwise, one theft or a fire can set you back thousands of dollars.

For example:

Your entire inventory of merchandise, office furniture and your computers were stolen from your home or storage facility. You’d be covered with business property insurance coverage or home business policy. ^[5]

Home Business Riders and In-Home Policies: Will It Cover Inventory Too?

A home insurance policy will only cover up to $2,500 in office equipment. It will not cover lost income due to the loss or any type of business loss. Adding a home business endorsement will bring the limit up to $5,000, sometimes up to $10,000, depending on which insurance company you’re with.. ^[5]

A standalone in-home business policy allows up to three employees and will cover all business property. It will cover business interruption if the home becomes uninhabitable and may even pay for a temporary location for the business. An in-home business policy will also cover you against lawsuits. ^[5]

For example:

If you are a tutor or teach a musical instrument from home, see if your insurer will sell you a liability endorsement, in case anyone gets hurt during a meeting or lesson.

If you run a business with employees and have extensive inventory or lots of business equipment, you’ll want a standalone in-home business policy.

Cyber Insurance: Protecting Customers and Clients

If you store sensitive customer or client information, you will want to have cyber insurance, in case of a data breach or other type of cyber crime that endangers the financial security of others.

More small businesses are the targets of cyber attacks than larger companies that have security measures in place. Consider the consequences of getting hacked and what it would cost you to rectify the problem.

If you have access to a client’s network as a contractor, you should have cyber insurance. People in IT and others who access a client’s network should be protected against bad actors.

Other Types of Business Insurance You May Need

Professional Liability Insurance

A professional liability insurance policy will protect against claims due to errors, omissions, or professional negligence.

Business Owners Policy (BOP)

A BOP policy covers business property, loss of income, extra expense and liability more comprehensively than an in-home business policy.

Product Liability Insurance

If you sell a product or products and a lawsuit is filed against you, without product liability insurance, you’re paying for legal fees out of your own pocket.