Self-employed business insurance: 8 types you need

Navigating business insurance as a self-employed individual is no easy feat. There are numerous coverage options, and determining the right fit for your unique situation can be nearly impossible without knowing what to look for.

As a self-employed individual, you need to proactively protect your business from unforeseen events.  In fact, as much as a third of businesses experience issues that could have been covered by insurance. And self-employed businesses are no exception. 

Whether it's a legal dispute, a work-related injury, property damage, a vehicle accident, or theft, having insurance coverage can safeguard your business.

Let’s demystify self-employed business insurance, plus look at the key types and their costs:

What does self-employed business insurance cover?

Types of self-employed business insurance

How much does self-employed business insurance cost?

What factors influence self-employed business insurance costs?

Do you need self-employed business insurance?

Ways to save on self-employed insurance

Other types of self-employed insurance

Next steps for self-employment success

Self-employed business insurance FAQ

What does self-employed business insurance cover? 

Self-employed insurance is meant to cover many of the risks of running a business as a freelancer or self-employed individual. However, you can mix and match different types to fit your business. When considering whether to invest in insurance, research the various things that business insurance can cover. 

Business insurance can protect you from things like: 

• Unexpected events forcing business closure 
• Injuries involving your business
• Property damages
• Vehicle accidents
• Theft or negligence 
• Business disputes

Types of self-employed business insurance

Each type of self-employed business insurance addresses specific risks that could impact your business, so it's important to understand what they cover.

General liability 

General liability covers the claims of bodily injury or property damage caused by your business operations. This is the most basic type of business insurance. It covers claims of bodily injury, property damage, or personal injury caused by your business operations.

Commercial auto

If you use a vehicle for business purposes (even just running errands or visiting clients), you need this insurance. It covers accidents, theft, and damage to your business vehicle.

Errors and omissions

Errors and Omissions insurance, also known as professional liability insurance, protects you from claims of negligence or mistakes made in your professional services. This coverage covers claims if a client alleges that your professional services or advice caused them financial harm due to errors, negligence, or omissions.

Commercial property 

If you own or lease business space, this insurance covers your building and its contents (equipment, inventory, furniture) against damage from fire, theft, vandalism, and other covered perils.

Workers’ compensation

If you have employees you’ll need workers’ compensation insurance. It’s required in most states if you have employees, and covers medical expenses and lost wages for work-related injuries or illnesses.

Business interruption

If your business is forced to close temporarily due to a covered event, such as a fire or natural disaster, business interruption insurance can help replace lost income and cover ongoing expenses.

Cyber liability

Cyber insurance is meant to protect against cyberattacks. It helps cover the costs of cyber-related incidents that could happen to your self-employed business, such as ransomware attacks and data breaches. 

Business owner’s policy (BOP)

A business owner's policy (BOP is a bundle of essential coverages, typically including general liability, commercial property insurance (covering your business equipment and inventory), and business interruption insurance (covering lost income due to unexpected events).

How much does self-employed business insurance cost? 

Insurance costs can vary depending on your business and the carrier you choose. For example, the average monthly insurance cost for a business owner's policy is $57, while cyber liability insurance could cost as much as $145 per month.

• General liability: $42
• Commercial auto: $147
• Errors and omissions: $61
• Commercial property: $67
• Workers’ compensation: $45
• Cyber liability: $145
• Business owners policy: $57

These figures are average estimates and your actual premiums may differ based on your specific business needs, location, coverage limits, and risk profile. It's important to get quotes from multiple insurance providers to compare prices and coverage options tailored to your unique circumstances.

What factors influence self-employed business insurance costs?

Self-employment insurance is a crucial aspect of your operating costs, and the exact amount you'll pay can vary significantly based on several factors. While there's no one-size-fits-all answer, understanding the variables that influence your insurance premiums can help you budget effectively and make informed decisions.

Here are some things that can influence the cost of self-employment insurance:

• Your industry and profession: The perceived risk associated with your industry and profession is a major factor.
• Your location: Factors such as local crime rates, natural disaster risk, and the cost of living can all influence premiums.
• Your coverage needs: The types of insurance you select, your coverage limits, and your chosen deductible all affect your final premium. 
• Your business size and revenue: Larger businesses with higher revenues typically require more extensive coverage, resulting in higher premiums. 
• Your claims history: A history of claims can increase your premiums, while a clean record may lead to discounts. Insurance companies use claims history to assess your risk level and determine your premiums accordingly.
• Your business structure: The legal structure of your business can also impact your insurance costs. 
• Your experience level: If you're new to your profession, you might face higher insurance premiums until you establish a track record of success.
• Your risk management practices: Implementing risk management measures can help you reduce your insurance premiums. 
• Your insurance provider: Different insurance companies offer varying rates and coverage options. It's important to compare quotes from multiple providers to find the best deal for your needs.

Do you need self-employed business insurance?

Whether you're a freelancer, independent contractor, or sole proprietor, the unexpected can happen. You're still exposed to risks that might lead to financial losses, even if you're a one-person operation.

When deciding whether you need self-employed business insurance, consider things like: 

• What risks are associated with your business? Think about the potential liabilities your business has, such as property damage or interruptions that might affect your business. 
• How much coverage is enough? Assess the value of your assets, potential legal costs, and income loss to determine which coverage limits you need. 
• What are the costs and benefits of insurance? Weigh the monthly and annual premiums against the potential financial burden of an incident.

Self-employed business insurance comes with many benefits: 

• Protection from liability: If a client or third party is injured or their property is damaged due to your business operations, you could be held liable for their losses. Liability insurance can cover legal fees, settlements, and medical expenses.
• Protection of business assets: If your business property is damaged or stolen, insurance can help you replace or repair it. This includes equipment, inventory, and even your home office if you work from home.
• Income replacement: If you're unable to work due to illness or injury, business interruption insurance can help replace lost income and cover ongoing expenses.
• Professional credibility: Many clients and partners prefer to work with businesses that have insurance, as it demonstrates professionalism and responsibility.

When insurance might not be necessary:

• Low-risk businesses: If you operate a low-risk business with minimal interaction with the public, you may feel comfortable forgoing insurance. However, it's crucial to weigh the potential risks carefully.
• Limited assets: If you have minimal business assets to protect, the cost of insurance might outweigh the benefits.

Ways to save on self-employed insurance

While securing comprehensive coverage is essential, there's no need to overpay. 

Here are some savvy strategies to help you reduce your self-employment insurance premiums:

• Bundle your policies: Many insurers offer discounts for purchasing multiple policies, such as combining general liability and property insurance into a Business Owners Policy (BOP). Bundling can streamline your insurance management and potentially lead to significant savings.
• Increase your deductible: Opting for a higher deductible can lower your premiums, but make sure you have the financial means to cover it in case of a claim.  
• Review your coverage regularly: Your business needs evolve over time, so it's essential to review your insurance coverage annually. You might find opportunities to adjust your coverage limits, eliminate unnecessary policies, or explore new options that better suit your current situation.
• Inquire about discounts: Many insurers offer discounts for various reasons, such as belonging to professional associations, implementing safety measures in your workspace, completing risk management training, or maintaining a clean claims history. Don't hesitate to ask your insurer about potential discounts.
• Compare quotes diligently: Insurance rates can fluctuate significantly between providers. Take the time to compare quotes from multiple insurers to ensure you're getting the best value for your money. Online comparison tools and independent insurance agents can be helpful resources in this process.
• Consider a pay-in-full discount: Some insurers offer discounts for paying your annual premium upfront rather than in monthly installments. If your cash flow allows, this can be a smart way to save.
• Improve your risk profile: Taking steps to mitigate risks in your business can make you a more attractive customer to insurers. This might include implementing safety protocols, conducting regular risk assessments, and investing in security measures.
• Shop around at renewal time: Don't automatically renew your policy without exploring other options. Loyalty doesn't always translate to the best rates, so shop around and compare quotes before committing to another year with your current insurer.

The cheapest option isn't always the best. Strive for a balance between affordability and comprehensive coverage that adequately protects your business. By being proactive and informed, you can secure the insurance you need without breaking the bank.

Other types of self-employed insurance

While having liability protection is important for your business, so are other types of self-employed insurance, such as various health-related coverages, including: 

Health Insurance for Self-Employed

Health insurance is essential for everyone, but especially for self-employed individuals who don't have employer-provided coverage. Having self-employed health insurance protects you from high medical costs and ensures access to necessary care. You can explore options through the Health Insurance Marketplace or private insurers.

Disability and Life Insurance for Self-Employed

As a self-employed individual, your income is your livelihood. Disability insurance replaces a portion of your income if you become unable to work due to illness or injury. This can be crucial for covering living expenses and medical bills. Life insurance can provide financial support to your loved ones in the event of your death, helping them cover debts, living expenses, and future financial goals.

Dental and Other Insurance for Self-Employed

Beyond the basics, consider dental insurance to cover routine checkups, cleanings, and procedures. Vision insurance can help with eye exams and glasses or contacts. You might also explore accident insurance for additional coverage in case of unexpected injuries.

Next steps for self-employment success

Now that you're equipped with knowledge about the types of self-employed business insurance and ways to save on premiums, it's time to take action and secure the protection your business deserves.

Staying organized is crucial for self-employed individuals. Accounting software with built-in payroll and insurance features like worker compensation through QuickBooks Payroll can be a valuable tool for tracking insurance expenses and protecting your team.

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