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Freelance Writers: Do You Need Liability Insurance? Here’s How to Tell

Yesterday, I sent over the last chapters of the book on freelancing with my editor’s changes incorporated (big sigh of relief). One of the things covered in this upcoming publication is whether or not to incorporate, which led to a discussion about liability insurance for freelancers.

The book I wrote covers how to start any kind of freelance career; it wasn’t specifically focused on freelance writing.  But of course, this got me to thinking about liability insurance as it relates to freelance writers. So I did some digging.

“Yuwanda, do you have liability insurance?”

I’ve been freelancing since 1993; full time since 2007 this last stint – and no, I don’t carry liability insurance. To be honest, I never gave it a second thought. As a writer, my thinking is, “What could I possibly be sued for?

When I owned my editorial staffing agency, of course, I carried it. But once I closed that and Inkwell Editorial became an online portal for me to showcase my freelance writing books, seminars and e-courses, it never occurred to me to hang onto this type of insurance.

Before we get into if you need it or not, let me first explain what it is.

What Exactly Is Liability Insurance?

The first thing you should know is that there are separate kinds, ie: employer’s liability; public liability; product liability; directors and officers liability; and professional liability. The last one is the one most freelance writers need to be concerned with.

For your general knowledge, following is a brief explanation of each to give you an understanding of what each type covers.

5 Types of Liability Insurance Freelance Writers Should Know About

i) Employer’s Liability Insurance: Employer’s liability insurance is what employers must carry to protect them in case an employee suffers a job-related injury, or the company is sued by some action caused by an employee.

When I had my editorial staffing agency, I had to have this type of insurance because we sent temps on site to client offices. It was my firm’s job to cover them because they were Inkwell Editorial employees, NOT the client’s employees.

As a freelance writer, unless you hire employees (NOT other freelance contractors), you don’t need this type of insurance. Learn more about employee liability insurance.

ii) Public LiabilityDo Freelance Writers Need Liability Insurance?: This type of insurance covers you in case you’re sued by members of the public. It covers bodily injury and property damage.

As a freelance writer, I can’t think of an instance when you would ever need this type of insurance. In all my research, it seems to be more common overseas than in the U.S. Learn more about public liability insurance.

iii) Product Liability: This type of coverage protects you against suits arising from some defect in a product you sell, manufacture or distribute. It covers bodily injury and property damage losses.

As a freelance writer, your “product” is words. Although the pen is indeed mightier than the sword, chances are between zero and none that you as a freelance writer will ever need product liability insurance.

iv) Directors and Officers Liability: This type of insurance covers you for claims made against you while serving as an officer of a company (eg, CEO), or on a board of directors, for example.

As an interesting aside, it does not cover willful acts — which is probably one reason why most corporations are quick to cut ties with big whigs who commit acts that they know aren’t covered under this type of insurance (in addition to the bad PR they receive, of course).

Unless you incorporate, become an officer in your corporation and commit some type of suable offense, you will never need this type of insurance. Learn more about directors and officers liability insurance. The history of it all was quite fascinating to me.

v) Professional Liability: Professional liability insurance (PLI) — aka professional indemnity insurance (PII) and errors & omissions (E&O) — protects professional advice and service-providing individuals and companies from negligence claims made by a client.

As a freelance writer, this is the type of insurance you will most likely get if you decide to pick up a liability policy.

Some common claims that would be covered under this type of insurance that you as a freelance writer might find helpful are negligence, misrepresentation, violation of good faith and fair dealing, and inaccurate advice.

An E&O policy, as this type of insurance is commonly referred to in the U.S., would, in most cases, cover your legal fees, as well as any judgment that may be awarded in a successful civil suit. Note: The policy does not cover criminal negligence.

Example of When You Might Need Liability Insurance as a Freelance Writer

You’re hired by a pharmaceutical ad agency to write copy for their website for a new drug campaign. The final copy that’s posted to their website has the dosage wrong. Even though the copy you turned in had the correct dosage, you might still be sued by the ad agency – or their client (the end user of the copy) – for “inaccurate advice.”

Even if you win the suit, you will most likely have to spend thousands in legal fees to defend yourself. Your E&O policy would cover you.

Quick Facts about Professional Liability Insurance Freelance Writers Should Know

Policies vary on what they will cover. For example, some will cover you for negligence by other independent contractors you may hire, while others will only cover employees.

Policy amounts vary. The most common policies are those for coverage of $1 million. This is because when a particular client asks for it, this is the amount that they require you to have – at a minimum. But you can get coverage for smaller amounts, eg, $100,000.

Policy costs: The cost for E&O insurance depends on a number of factors, eg, type of business, size of business, risk of being sued, and the amount of coverage you want. In my research, I found quotes for under $15 per month, to those as high as $60 per month. So it pays to shop around.

Are you really covered? A general liability policy will not protect your own property; only that of the business. It’s why you need a separate E&O or business owners policy (BOP) policy. A BOP is enhanced coverage that combines general liability insurance and property insurance.

How to Find Affordable Professional Liability Insurance

I’d first start by calling my homeowners/renters insurance, car insurance or life insurance provider. Usually, when you bundle policies, you can save money – in some cases, a pretty good chunk of change depending on how much many policies you have with a particular provider.

When I owned my home, I had all of my insurance – car, homeowners – with one provider. If I’d thought about it, I would have gotten my life insurance with them too.

What about General Liability Insurance?

Good question. The reason I left this for last is because it is a common type of insurance that most small business owners get as part of a BOP package. For example, if you’re a freelance writer and you change your business structure from sole proprietor to an LLC or S-Corp, you might pick up this type of insurance. What is it? As explained on the SBA’s site, general liability insurance, aka …

Commercial General Business Liability, protects a company’s assets and pays for obligations – medical costs, for example – incurred if someone gets hurt on your property, or when there are property damages or injuries caused by you or your employees. Liability insurance also covers the cost of your legal defense and any settlement or award should you be successfully sued. Typically these include compensatory damages, nonmonetary losses suffered by the injured party, and punitive damages.

One important thing you need to keep in mind about general liability insurance is that it DOES NOT cover errors and omissions. You need a separate policy for that – an E&O policy. “What’s the difference then between general liability and professional liability coverage?” you may be thinking.

Again, good question.

The Difference between General Liability and Professional Liability Insurance

As the name implies, PLI protects you and your freelance business from claims regarding negligence as it relates to the “professional services” you provide. General liability insurance covers you from claims stemming from “any” type of lawsuit your freelance business could face. They both cover you, but in different ways. Following is an example to clarify.

Let’s say you operate your freelance writing business out of your home. A client visits you to drop off some source material for a case study you’re working on for them. He trips and falls on the crack in your driveway. He sues.

A general liability policy would cover this. “But,” you may be thinking. “Wouldn’t my homeowners insurance cover this?

Most likely not, as the visitor was there on a “business visit.” Typical homeowners insurance policies do not extend coverage to your business, according to the U.S. Small Business Administration. Although most insurers will let you amend your homeowners policy to cover your home-based business, the coverage is most often not enough to meet the minimum that a client requesting insurance may want (again, usually at least $1,000,000).

If you made an error in the copy for this client and he sued you, then your professional liability insurance policy would cover this “negligence” on your part, as it is directly related to the “service” you provide as a freelance copywriter.

See the difference between general liability and professional liability insurance?

When I ran my editorial staffing agency, clients often requested both types of coverage. They want you to be covered from all angles, just in case. During the research for this post, I found this to be a common request. You can learn more about the differences between general liability and professional liability insurance here.

How Corporate Red Tape & the IRS Affect Your Liability Insurance Needs as a Freelance Writer

As I said, I’ve never been asked to provide proof of insurance as a freelance writer. Most of my clients are very small to mid-sized businesses. But I have gotten caught with my tax bloomers down — and part of it had to do with how I classified the temps I hired.

After that debacle, I immediately hired an accountant and got right with the IRS. With that being said, let’s take a look at how large corporations and the IRS may affect whether or not you decide to get professional liability insurance.

Dealing with Corporations, Government Agencies and Their Insurance Requirements

Large corporations and/or government entities are the types of clients that will most likely ask for E&O insurance. And you know what? Many times it’s just the corporate and/or government machine and their lawyers at work. It’s not because it’s a real need. What do I mean?

These types of clients use many “vendors,” as they refer to suppliers. This includes everything from those they order office supplies from, to their food suppliers, to their uniforms, to … the “vendors” they hire to write their website copy.

What are big conglomerates known for? Systems; as in, they have one that everyone must conform to –even when it may not be necessary. Hence, when they hire a new vendor (eg, a freelance writer), you are most often asked to comply with the same rules and regulations as other vendors. This includes providing proof of insurance.

While it may be necessary for the vendor they use to staff temp positions, it may not have a hill of beans to do with your services as a freelance copywriter. So how do you handle it? You can either:

i) Point it out to them — ie, that your services are not the type that usually require this type of insurance – and ask them to waive this stipulation;

ii) Turn down the job; or

iii) Pick up the insurance and pass the cost on to them. One freelancer relayed how she made this work for her in the comments section of a post on The Well-Fed Writer blog, which discusses liability insurance for freelancers. She wrote:

I had a gov. contracting client try to force the $1M policy issue about 4 years ago. Their contract was designed more for vendors who do prototyping work and the like. Because my services were nothing of the sort, and when I explained that I would have to pass the entire cost of the policy on to them, as they were the only client requiring it, they backed off.

We actually came to a comfortable resolution for all parties: we removed the clause requiring the policy and added one stating that they were responsible for final review and approval of all materials submitted before publication, and as such bore full responsibility for any errors or omissions in the text. After all, how could I control what they did with my copy after I submitted it? I now make this policy part of all of my project agreement.

Some may balk at you passing the cost on to them, while others may agree. This is why it’s really important to get all requirements for a job up front, because you don’t want to be slapped with a contract that requires this AFTER you’ve turned in your quote — or even worse, when you’ve completed a job and are waiting to get paid (it happens).

The IRS

Another reason you may need liability insurance is the Internal Revenue Service (IRS). To explain, if you routinely hire other freelancers, make darn sure they’re “freelancers/independent contractors” and not “employees” because if you misclassify them and you’re sued by a firm for work you turned in that they completed, you may or may not be covered for any negligence under your policy.

To be clear, you can be sued whether or not the person is an employee or an independent contractor, but again, as stated above, some policies will cover you for employee negligence, but not for non-employee (ie, freelancers/independent contractors) negligence.

Also, as one freelancer brought up in the comments section of The Well-Fed Writer blog post linked to above, some independent contractors may list you as their “employer” if they file for unemployment benefits, which can cause the IRS to come looking for you wondering why you haven’t paid into Worker’s Comp for this “employee.” You can be slapped with a huge tax bill if they determine that the freelancer you hired was in fact an employee.

One of the things that differentiates an “employee” from an “independent contractor” is that an independent contractor who is self-employed is more likely to have liability insurance than an actual employee. So to protect yourself from the long arm of the IRS, you might only want to hire independent contractors who have liability insurance.

I don’t require this of the freelancers I contract with, but it’s just some food for thought.

Some Questions to Consider to Help You Decide If You Need Professional Liability Insurance

This post has covered a lot of ground which no doubt has your head swirling, wondering if it’s something you should get. If you’re still confused, following are the questions I asked myself that helped me to decide.

What’s my risk of being sued?

Is the cost justified?

Do I have employees (or work with other independent contractors)?

Do I work/meet on client premises, or them on mine?

Is the client worth it?

As I said at the beginning of this post, I’ve been freelancing since 1993 and I’ve never been asked for any kind of insurance. Also, I can’t seem to wrap my head around an instance of how I could be sued, even though people sue for any and everything these days.

I work from home, but am very much a mobile business (as many of you know, I live and work these days from Jamaica). So I never have occasion for clients to visit me. I do hire other independent contractors, but I do the quality check on all material turned in, so they aren’t responsible for any changes I may make.

All of these led me to the conclusion that no, I don’t need liability insurance for my freelance writing business. However, if I had a client who was going to give me a lot of business and they had this requirement, I would definitely pick up a policy.

That’s the way I decided what was best for me. Your needs may differ, but at least now, you have full knowledge of what this type of insurance is, and if you need it as a freelance writer.

Do You Freelance? Do You Have Liability Insurance?

If you freelance, do you have this type of insurance? If so, why? If not, why not? Has reading this post changed your mind about whether or not you need it? How much does your policy cost if you have one? This is an important issue and I’d really love to gain some insight from you, so please share your feedback below.

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