• Advice

Liability insurance: Who needs it and why?

Sure, you understand why doctors need malpractice insurance, but even if you’re in a field that doesn’t require an advanced degree, specialty training or a license, you could benefit from having professional liability insurance. Here’s why.

All freelancers and small business owners, including accountants, real estate agents, consultants and beauty and fitness professionals, are expected and required to meet certain professional standards including meeting deadlines. And, of course, as a responsible freelancer who appreciates that their name and reputation is one of their most valuable assets, you do. However, even if you did everything correctly from your point of view, you could still get sued.

A few examples of common problems

  • Delayed deliverables: You have a deadline to meet, but your client did not give you all the information you need to get started in a timely manner. Because of their tardiness, you missed a deadline. The client may accuse you of being professionally negligent.

  • Miscommunication: You’re in a field with its own lingo, such as software development — which your client doesn’t fully understand. As a result, your client has unrealistic expectations about the project deliverables.

  • Differing expectations: Let’s say you’re a makeup artist and you did a client’s makeup for her wedding. Though she was happy on the day, she wound up not liking the way she looked in her photos and now blames you.

Or perhaps you actually did make a mistake, by missing a deadline for whatever reason and your client had to pay a penalty. One example is an accountant who filed their client’s taxes late.

Professional liability insurance covers lawsuits related to your work

Regardless of whether you were at fault or not, professional liability covers your court costs including legal fees, expert witness fees and court and administrative costs plus any settlement costs and court judgements should you lose at trial.

What professional liability insurance doesn’t cover

Professional liability covers negligence or perceived negligence related to your work — which usually relates in a financial loss for your client. It doesn’t cover physical injury or property damage; those would be covered by general liability.

Do I really need it?

In an ideal world, you would never need to use professional liability insurance. However, when you consider that 43% of small business owners say they have either been threatened to be sued or have been sued, according to U.S. Chamber Institute for Legal Reform, this type of insurance can give you much needed peace of mind.

You can learn more about Freelancers Union's liability insurance offerings here.

Anne L. Fritz is an experienced freelance writer and editor covering everything from finance to parenting to health and travel. You can read more of her work here.