Working for someone else comes with constraints — set hours, face time and pre-determined responsibilities to name a few. But it also has certain benefits, not least of which is protection from personal liability.

In other words, when you work for an outside entity, and a client is angry enough to sue, there is some official power that will address that suit. But when you work for yourself, and a displeased or injured client pursues legal action, you can quickly arrive at a situation where both your business and personal assets are at risk. Unless, of course, you have protected yourself with liability insurance.

What is liability insurance?

Liability insurance is a policy that protects an individual or business from being held accountable for malpractice, injury, and/or negligence. For freelancers, liability insurance will protect you financially if perceived professional or physical error results in your being sued for an injury, mistake or contractual miscommunication.

Depending on the policy limits, liability insurance can be used to cover your incurred legal expenses, and/or any settlements or judgments made against you.

There are two kinds of liability insurance: professional and general. Professional policies protect against claims regarding your work product or performance, like failing to show up for a contracted photo shoot, or crashing a company’s server while performing routine network updates. General policies protect your business from claims of bodily harm or medical expenses — if a wedding guest trips over your camera wires or you hit a pedestrian while driving your business vehicle.

Depending on your line of work, a professional policy may be sufficient, but freelancers with regular third-party interactions may benefit from a general policy as well. At Freelancer’s Union, we offer both general and professional policies, with coverage limits up to $2,000,000 for both. And, depending on your needs and industry, payments could begin at just $22 a month. Find out more about our coverage options here.

But will I ever need liability insurance?

If you’re reading this post with these words echoing in your mind, let’s get real: everyone messes up or faces unexpected adversity at some point in their career. It’s inevitable. And liability insurance could mean the difference between that hiccup becoming the end of your career, or simply being seen as a minor bump in your rearview mirror. Don’t believe us? These are just a few situations in which liability insurance can keep a freelancer from financial ruin:

1. A client stops by your home office to pick up a contract. Not noticing the throw rug between you and the door, he steps towards you and slips, falling and dislocating his shoulder. Fast forward a few weeks: that client is now suing you for his medical bills, lost income and emotional distress. And guess what? Even though the accident happened in your residence, most homeowner’s policies either exclude business-related expenses, or offer low payouts that would not begin to cover the kind of damages this client is seeking. But don’t worry: you’ve insured your business with a general liability plan, so instead of facing the loss of your home or the need to zero out your life’s savings, you’ll simply call an insurance adjustor and begin the claims process on your plan.

2. As the official videographer, you’ve been hired to capture the magic of a client’s wedding ceremony, but your built-in mic failed halfway through their vows, and they are furious over their now-silent film. There’s no second chances on this project, so the client’s only recourse is to seek financial remedy. Got liability insurance? No problem. Didn’t protect yourself with this kind of coverage? You could be facing the kind of legal fees that will quickly add up to financial ruin for you and your business.

3. You were hired to install a new email system for a Fortune 500 company and, days later, their server gets hacked, thanks to a small loophole you left unclosed. Now, all their client data has been compromised, and they’re holding you accountable for the cost of compensating those affected by the security breach. You’re looking at a huge law suit, but with sufficient liability insurance to back you up, most or all of the expenses will be reimbursed.

4. A client hired you as a consultant, and your advice led (directly or indirectly) to her major loss in the stock market. Not only is she ready to give you bad reviews on every digital platform available, but she’s turned to her legal team to try and recoup some losses at your expense. Time to close up shop — unless, of course, you’re covered by professional liability insurance.

5. Your business is ready to level up by signing that one big client contract... except the company won’t give you a chance unless you show proof of professional liability coverage. It’s time to start shopping for policies!

In any one of these instances, liability insurance is what stands between an independent contractor and his or her financial ruin. Sound like something worth exploring? Get started with a free quote, or reach out with any questions at membership@freelancersunion.org.