Joanna Stovic writes: The number of people choosing to become self-employed is gradually rising. Those people strive for independence, control and freedom from the stress inflicted on them by their previous employers. Since the start of the economic downturn, there has been a 10% growth in the self-employment sector. While venturing into self-employment has its own challenges, it can be rewarding if you know the right steps to take.

If you’re thinking about becoming self-employed or freelancing, there are a few fundamental issues that you need to consider before setting out. One of the most important but mostly ignored by many self-employed individuals is business insurance. Here are a few things you should know about business insurance for the self-employed.

Business Insurance is Tax Deductible

Business insurance is considered as one of the necessary costs of running a business. It is up to you to protect your business through public liability insurance. Freelancers and the self-employed can enjoy tax deductions from their business insurance when calculating taxes. A business expense is deductible if it meets two criteria:

It must be a common day-to-day expense in your line of work
It must be both appropriate and helpful to your business

Business insurance meets both criteria. While it may seem like an additional cost to you, business insurance is critical as most client contracts, industrial regulations and leases will require that you have coverage. Being able to write off business insurance costs helps you make additional savings as a self-employed.

Homeowner’s Insurance Doesn’t Cover Business Assets/Activities

Considering that a large number of self-employed individuals work from home, it’s important to understand that your homeowner’s insurance policy doesn’t cover your home-based business. Don’t assume you’re safe with your homeowner’s insurance. You need to have a separate business insurance to cover your home-business assets and activities.

For instance, if a delivery guy slips at your doorstep and breaks an ankle while dropping off a package, your homeowner’s insurance will not cover the injury. Without self-employed business insurance, you may as well be facing potential legal costs if someone sues you as well as unexpected medical expenses.

Insurance Requirements Vary with Business Industries

The type of business insurance you take may depend on your line of work. For instance, if you provide professional services like architecture, clients may require you to have professional liability insurance. This ensures that you’re liable for possible mistakes that may happen in your line of work such as failing to follow industry standards.

For general contractors, you’ll need to have general liability insurance to cover for potential mishaps or damages that may happen as you work. You may also be required to have your own worker’s compensation insurance to cover injuries on-the-job. Getting health coverage for the self-employed also offers additional cover.

Lawsuits Can Hit You Directly

Being self-employed can come with certain risks of facing potential lawsuits over a project or projects you worked on. Considering that a sole proprietorship business structure is less protected without separate business cover, it’s important to have business insurance to shield yourself from lawsuits that may target both your personal and business assets.

With business insurance, you can settle any disputes without worrying about losing your personal assets.

Conclusion

Anyone venturing into self-employment should follow certain rules on running a self-employed business, and this includes having business insurance. While you may be tempted to skip getting insurance for your self-employed business, because of the cost, going without coverage puts you at risk of losing everything in case something bad happens.

By Joanna Stovic

© 2017 Copyright Joanna Stovic - All Rights Reserved Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

Only logged in users are allowed to post comments. Register/ Log in

The Market Oracle is a FREE Financial Markets Forecasting & Analysis web-site.
(c) 2005-2024 MarketOracle.co.uk (Market Oracle Ltd) - Market Oracle Ltd asserts copyright on all articles authored by our editorial team and all comments posted. Any and all information provided within the web-site, is for general information purposes only and Market Oracle Ltd do not warrant the accuracy, timeliness or suitability of any information provided on this site. nor is or shall be deemed to constitute, financial or any other advice or recommendation by us. and are also not meant to be investment advice or solicitation or recommendation to establish market positions. We do not give investment advice and our comments are an expression of opinion only and should not be construed in any manner whatsoever as recommendations to enter into a market position either stock, option, futures contract, bonds, commodity or any other financial instrument at any time. We recommend that independent professional advice is obtained before you make any investment or trading decisions. By using this site you agree to this sites Terms of Use. From time to time we promote or endorse certain products / services that we believe are worthy of your time and attention. In return for that endorsement and only in the cases where you purchase directly though us may we be compensated by the producers of those products.