There are a lot of reasons to become a freelancer. The common joke is that it’s the only job where you get to work in your underwear, but anyone who’s seen Magic Mike knows that’s not true. But the freedom you get by becoming a freelancer isn’t limited to just your wardrobe: you can set your own schedule, take only the projects you want, and be more creative than if you were working for a large company.
As a freelancer, you take on a lot of responsibility. Not only are you solely responsible for your projects from start to finish, you’re also responsible for your own success. You, and by extension, your family, are dependent on your drive to succeed. In many ways, this is exhilarating, and in many other ways, it’s absolutely terrifying.
One of the ways freelancing can freak you out is now you are completely responsible for your insurance needs. If you’ve worked in a corporate environment, you might be used to just getting a single package of benefits, but now that you’re out in the free world, you can pick any insurance plan you want – as long as you can afford it.
To help you navigate the world of insurance, we’ve put together guides to the most crucial insurance products that freelancers need.
What it is: Health insurance helps you pay for medical and surgical expenses.
Why you need it: Because it’s mandatory! Okay, that’s not the only reason to get it, but it is true: unless you qualify for an exemption, you’ll get charged a fine for not having health insurance coverage. More important, health insurance is the best way to protect you and your family from expensive medical bills.
→ Read more about health insurance for freelancers
What it is: Dental insurance is kind of like health insurance for your teeth. It will help you pay for both regular cleanings and more expensive procedures.
Why you need it: While family health insurance plans are required to cover dental expenses for anyone on the plan under the age of 18, no such requirement exists for adults. And, as anyone who has teeth knows, adult dental care can get really, really expensive, especially if your needs are more complicated than the average teeth-user.
Long-term disability insurance
What it is: Long-term disability insurance provides replacement income during long periods of disability where you’re unable to work. A disability is any health condition that stops you from working. It can be a temporary disability – such as a mental or physical disease that lasts for a year or more – or permanent disability.
Why you need it: One in four twenty-year-olds will experience a disability before they retire. You’re twice as likely to get a disability than you are to die young. Medical problems led to 60% of personal bankruptcies, with lost income due to illness accounting for 40% of those bankruptcies. For freelancers (and, well, everybody), long-term disability insurance is super important. If you can’t work, you can’t make an income.
What it is: Life insurance pays out a tax-free sum of money to your beneficiary, usually a family member, in the case that you die unexpectedly.
Why you need it: If you have a family, life insurance is the best way to guarantee that they’ll be taken care of in the event of your untimely death. The tax-free sum of money, called a death benefit, will replace all of that lost income that you would’ve been using to take care of your family. It will help your kids pay for college, plus it can help your family pay off outstanding debts like mortgages.
What it is: Liability insurance is a concept that covers a bunch of different products. Basically, liability insurance covers you whenever you might get sued for something – whether you’re at fault or not. There are a few different types of liability insurance that cover specific cases. Whether or not you need it depends on your line of work.
**Why you need it: **If you don’t have it, a single lawsuit could bankrupt you and put you out of business. The lawsuit doesn’t even have to be legitimate; the U.S. Chamber of Commerce estimates that a frivolous lawsuit can cost anywhere between $2,000 and $5,000. Whether you’re a carpenter, a photographer, a writer, or some other freelance profession, the proper liability insurance coverage can be crucial to the survival of your business.
What it is: Renters insurance will cover the cost of replacing personal property in the event of burglary or disaster. It also includes liability insurance for any injuries sustained in your rental property.
Why you need it: If you’re a freelancer working from home, renters insurance is basically your home office insurance. Note that you’ll need to add a rider to cover your business property – such as your computer. Renters or homeowners insurance with a business rider is the perfect coverage for a freelancer just starting out on their own.
→ Read more about renters insurance for freelancers