Contract Work and Business Insurance

The Question: I can’t find full time work and have found some contract work, do I need business insurance?

The correct answer to this question is a resounding yes.

A large number Americans have found themselves laid off or cut back to part time in the last several years.  In addition to a regular paycheck, the biggest loss is often medical insurance.  This scaling back of the economy has pushed many of these people to freelance work or consulting.  While this helps in replacing the paycheck, benefits and insurance are a different story.   In addition, they are now facing additional risk to the assets they currently have.

First, any business whether home based or not needs to have a basic insurance package in place.  A business owner’s policy may fit the situation by including property insurance, general liability, and usually some form of business interruption insurance all in one policy.

This type of policy will be less than purchasing each type of insurance coverage separately with individual premiums for each.  In addition, it is imperative if you are doing freelance or consulting work to get professional errors and omissions, or E & O insurance.

Struggling to make ends meets while doing contract and freelance work and trying to manage risk is a difficult but not impossible undertaking.  Allowing your home and family’s assets to be at risk should be unacceptable to you.  Many folks that utilize a home office and/or work out of their homes make the unfortunate assumption that their homeowner’s or renter’s policy will cover any losses.  Those policies don’t cover businesses.  Personal auto policies generally do not cover your auto when being used primarily for business purposes.  In addition, many policies have exclusion provisions for ‘illegal’ acts which could include ‘business being conducted in a residential area’ so it’s important to check your town’s specific ordinances and business permitting.

The next critical piece is getting medical insurance in place.  Getting a group insurance policy in place for your business may be expensive.  During the initial start up, there may be other alternatives to look at when it comes to medical insurance.  First, was COBRA available? Consolidated Omnibus Budget Reconciliation Act (COBRA) health provisions passed in 1986 allows continued group health coverage that otherwise would be terminated.  Health insurance is critical to managing risk.  A devastating medical issue could bring financial ruin to anyone.  If COBRA isn’t available, can you go on a spouse’s group health plan? The Affordable Care Act now offers various plans/exchanges in every state.

By taking on contract work, you have gone into business for yourself, like it or not.  Sit down with a commercial insurance broker and work together to manage the risk now facing you as a new small business.  Other resources are your state department of insurance and your present property and casualty agent.

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