Are you a freelancer? If you are also searching for insurance for a freelancer, you have landed at the right article. Independent contract workers and freelancers are vital for companies and are reshaping how work is approached today.
Freelancing space in recent years has seen a massive boost in individuals who are fed up with their monotonous path of traditional 9 to 5 jobs and want to rush for time, independence, and better opportunities.
Although freelancers serve the company like employees, they do not enjoy the traditional employee benefits like other employees. Lack of retirement plans and safety nets like health insurance and life insurance always keep freelancers’ futures prone to unexpected financial problems.
Freelancers can also take advantage of insurance policies and secure their future. Let's explore the common query: Can freelancers take insurance? What are the various insurance for a freelancer?
Understanding Freelancer Lifestyle and their Problems
Before knowing the need for insurance for a freelancer, we have to understand their lifestyle. Freelancing opens the door to time flexibility and growth opportunities but prohibits the individual from the essential employee benefits he had during his job. Apart from this, Freelancing does help people earn a lot of money, but it depends on the market needs. So, the fluctuating nature of earnings already keeps the individual financially unstable. Not having any financial securities in such situations is not advisable. That is why insurance for freelancers becomes even more critical.
According to India’s Growing Gig and Platform Economy report by Niti Ayog , the percentage of freelancers in India’s workforce is expected to increase by 4.1% by the financial year 2030. In the United States, 42% of freelancers have no health insurance because of high costs. In India, no such data is available that points towards the stats of insurance trends in the freelance industry.
What is the Importance of Insurance for Freelancers?
Here are some of the benefits of insurance for a freelancer:
- Employees' traditional health benefits are lacking in freelancing, which keeps them vulnerable. They might also face issues as they do not have a company health plan.
- Some Health Insurance also provides access to good quality healthcare as they have a variety of hospitals where the policyholder can enjoy cashless services.
- Liability risk is always there in freelance work because there are potential risks of facing legal issues if the clients are unsatisfied. Without insurance, legal issues can become a huge problem.
- Freelancers have project-based work, and that’s why their income fluctuates. So, having financial backing, such as insurance, is always advisable.
- Apart from this, there are many tax benefits. Paying a health insurance premium makes you eligible for it. As per the tax deduction limit under Section 80D, for individuals under 60, paying health premiums makes you eligible to claim deductions up to 25,000. People over 60 paying health premiums have a deduction limit of up to 50,000.
- Some clients might ask for insurance, as for companies, hiring a freelancer is always a risky thing to do. Companies ask for insurance so that if the freelancer fails to deliver up to the standards, the insurance coverage can cover the cost of the damage. (Note:- It’s only a means of protection, so use it wisely.)
Common Misconceptions Related to Insurance among Freelancers
Freelancers have many common misconceptions about insurance, and because of these, they avoid taking it. There are a few of them:-
- I’m healthy
Not only freelancers but also ordinary people tend to avoid insurance by making excuses such as insurance being a waste of money because I am healthy or I don’t have to go to the hospital. They simply ignore that insurance is a kind of safety net, not an investment in which they will have to earn returns. Even if someone is healthy and fit today, it does not mean he can not face any unexpected health issue or mishap. So, saying that I’m healthy is a very lame argument.
- I have enough Projects
The primary source of income for freelancers is their client’s projects. They solely rely on it. They think that today if they have an income, such a situation will last forever. Getting projects in the freelance world depends on the market. Living in this delusion will be a foolish decision to make. Insurance is a proactive step to prevent financial problems in tough times.
- I don’t need tax benefits.
It is a common saying in India that insurance is just a financial product to avoid taxes. It indeed benefits people to save their taxes, but it is not confined to that. It goes beyond that. Insurance is a strategic investment that one should make to secure his future against any unwanted financial burden.
Freelancers must understand that they do not need insurance for good times. Insurance is not for increasing their wealth or having multifold returns. Insurance is financial assistance during bad times. Insurance is bought to prevent any financial crisis caused by a misfortunate event.
Different Types of Insurance For a Freelancers
Here are the different types of insurance for a freelancer:
- Professional Liability Insurance
Professional Liability Insurance is the most common type of insurance for freelancers or other solo contractors. There are many minor errors or mistakes while delivering a project. Usually, these kinds of things are settled between the company and the freelancer by making some adjustments.
However, if the company is unsatisfied with the settlement and takes the matter to court, professional liability insurance is essential. Professional Liability Insurance protects you in cases where the client or the company sues you, claiming for inadequate work. It covers all the legal expenses if a client or the company claims a financial loss due to errors, omissions, or negligence in the freelancer's work.
Freelancers with small or medium-sized businesses need not worry about professional liability insurance as it may feel heavy on their budget. However, freelancers who have a moderately grown business should consider this insurance. (Note:- If you have employees for your freelance business, you need to include them in the insurance policy)
- Home Insurance
Home insurance is essential because it provides coverage for the structure of your building and your belongings, including your office equipment. If freelancers have a heavy investment in office equipment, it will be wise to protect them against any fire or robbery by getting them covered by home insurance for freelancers.
- Health Insurance
Health Insurance is familiar to all of us. Freelancers must have it as they have yet to have any backing from companies that will provide them with a group insurance plan. There are many online services where self-employed and freelancers can apply for affordable health insurance.
- General Liability Insurance
General Liability Insurance is another kind of Liability insurance that covers the cost of injuries at your place or if someone gets injured because of your business.
However, if the freelancer is doing the client’s project from home, they do not need this kind of insurance as the risk of getting anyone injured by your business from your home is nearly impossible.
- Life Insurance
If you are a freelancer and the sole earner of your family, it becomes essential for you to have life insurance. For the employees, there are many employee benefits schemes in the company so that the employees' families have a safeguarded future in case of any mishaps.
But, for the freelancers, no company cares for their families. Freelancers must ensure that even if they have a sufficient number of projects, they have life insurance.
Life is not predictable at all. Any unexpected situation can occur at any time. As freelancers don’t have any backing, they must have safety nets for their future in the form of insurance.
