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5 Types of Insurance Freelancers Should Know About

October 24, 2023
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Freelancing offers a world of opportunities and flexibility but also comes with its unique set of challenges, one of which is managing your financial security. Freelancers often don't have the luxury of employer-sponsored insurance plans that full-time employees do. Therefore, it's essential for freelancers to be proactive in protecting their well-being and assets.  

In this article, we'll explore five types of insurance that could help provide that extra layer of security. For this topic, we got help from Peter Bourg, a financial advisor with Ashford Advisors.

1. Health Insurance: Not Just a Nice-to-Have

Most people have at least one type of insurance, usually health insurance. Health insurance can provide access to quality healthcare providers and help you save on doctor’s visits, hospital stays, prescriptions, and preventive care. Bourg suggests, “If you can get on a spouse’s or a parent’s (if you're under age 26) company-sponsored plan, do it! There are likely savings available that you may not find elsewhere.”  

Without a company-sponsored health plan, freelancers are left to shop for coverage from three sources:

The Health Insurance Marketplace® – this is run by the federal government. There are pros and cons to this route, but going to the website will show you the various options and plan pricing offered in your state.

Health insurance broker – this is someone you can work with who will shop it for you and bring back options. It doesn’t cost anything; they get a cut of the premium you pay, and you don’t pay a markup.

Association health plans – professional organizations, membership groups, and unions often have negotiated health insurance plans for their members.  

2. Disability Insurance: Covering the What-Ifs

In addition to health insurance to help cover a portion of your medical bills, disability insurance helps provide financial protection if you’re unable to work due to a disability or illness. Disability insurance offers income replacement, allowing you to cover your essential expenses even when you can't work. Disabilities can range from physical injuries to mental health conditions.  

Bourg notes, “People don’t think about this type of insurance as much, but it can be an important one. I recently had a client out of work for 10 months. The fact that he could keep paying his mortgage and other bills really allowed him to focus on his recovery.”  

Disability insurance may seem less necessary when you're on top of your health game. However, considering that over 25% of our 20-year-olds today will be disabled before they retire, according to the Council for Disability Awareness, it might just be worth every penny.

3. Life Insurance: More Than a Death Benefit

Life insurance can be a gloomy topic, with the primary purpose being to provide a sum of money to your beneficiaries upon your death. However, it can be beneficial during your lifetime too. Some life insurance policies, like whole or universal life insurance, accumulate a cash value over time that can be tapped into later in life to supplement your retirement income or help cover unexpected expenses. 1 2  

There are two main categories: term life insurance and permanent life insurance. While term life covers you for a set amount of time (say, 10, 20, or 30 years), permanent life covers you for your entire life, so long as premiums are paid. The various nuances between these types can shape your decision based on your specific financial goals.

4. Umbrella Policy: The Safety Net You Didn't Know You Needed  

On top of your usual home or auto insurance, an umbrella policy is an additional layer of protection that steps in when your standard insurance maxes out. It can cover things like lawsuits for property damage or injuries, libel, and slander.  

“Umbrella policies typically cover a lot for not a lot of out-of-pocket costs,” Bourg explains.

For freelancers who interact with clients, third parties, or the public, an umbrella policy can safeguard your assets and protect your financial interests in case of a lawsuit or liability claim. It's an affordable way to add an additional level of protection to your freelance business.

5. Professional Liability: The Often-Overlooked Protection

As a freelancer, you're responsible for the work you deliver, and there's a chance that this work could lead to financial loss or harm to your client. This is where professional liability insurance, also known as errors and omissions insurance, comes into play.  

This type of insurance is particularly important for consultants, designers, writers, and other professionals who provide advice, services, or deliverables to clients. Professional liability insurance can cover legal expenses and potential settlements, ensuring that a mistake doesn't result in a financial catastrophe.  

According to Bourg, it’s needed in some industries and not needed in others, but the freelance world can cover a lot of different industries so it’s important to consider your specific work and the clients you have.

Smart Freelancers Know Their Insurance Options

Navigating the insurance space as a freelancer is no walk in the park, but it's essential to ensuring your financial stability and peace of mind. Deciding what insurance you need depends on several factors—your field of work, your health, your financial goals, and your risk tolerance.  

Remember, the purpose of insurance is to protect your income, your health, and your loved ones from unexpected adversities. As growing numbers of people begin freelancing, our understanding of these safety nets becomes crucial. And that is a financial responsibility worth taking on.

Interested in reading more from our financial planning series? Check out our other blogs:

A Freelancer’s Guide to Riding the Waves of Fluctuating Income

4 Ways Freelancers Can Build a Good Financial Foundation

5 Ways Freelancers Can Plan for Retirement and Build Wealth 

1 Some whole life policies do not have cash values in the first two years of the policy and don’t pay a dividend until the policy’s third year. Talk to your financial representative and refer to your individual whole life policy illustration for more information.  

2 Policy benefits are reduced by any outstanding loan or loan interest and/or withdrawals. Dividends, if any, are affected by policy loans and loan interest. Withdrawals above the cost basis may result in taxable ordinary income. If the policy lapses, or is surrendered, any outstanding loans considered gain in the policy may be subject to ordinary income taxes. If the policy is a Modified Endowment Contract (MEC), loans are treated like withdrawals, but as gain first, subject to ordinary income taxes. If the policy owner is under 59 ½, any taxable withdrawal may also be subject to a 10% federal tax penalty.

Peter Bourg is a Registered Representative and Financial Advisor of Park Avenue Securities, LLC (PAS). Securities products/services and advisory services are offered through PAS, member FINRA, SIPC. Financial Representative, The Guardian Life Insurance Company of America® (Guardian), New York, NY.  Park Avenue Securities is a wholly owned subsidiary of Guardian. Ashford Advisors is not an independent registered investment advisor nor an affiliate or subsidiary of PAS or Guardian. Ashford Advisors is not registered in any state or with the U.S. Securities and Exchange Commission as a Registered Investment Advisor. CA Insurance License #0I07706; AR Insurance License #10381689. No compensation has been provided by the adviser in connection with this interview. Wripple is not an affiliate or subsidiary of PAS or Guardian 2023-162979 (Exp. 10/25)

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Freelancing offers a world of opportunities and flexibility but also comes with its unique set of challenges, one of which is managing your financial security. Freelancers often don't have the luxury of employer-sponsored insurance plans that full-time employees do. Therefore, it's essential for freelancers to be proactive in protecting their well-being and assets.  

In this article, we'll explore five types of insurance that could help provide that extra layer of security. For this topic, we got help from Peter Bourg, a financial advisor with Ashford Advisors.

1. Health Insurance: Not Just a Nice-to-Have

Most people have at least one type of insurance, usually health insurance. Health insurance can provide access to quality healthcare providers and help you save on doctor’s visits, hospital stays, prescriptions, and preventive care. Bourg suggests, “If you can get on a spouse’s or a parent’s (if you're under age 26) company-sponsored plan, do it! There are likely savings available that you may not find elsewhere.”  

Without a company-sponsored health plan, freelancers are left to shop for coverage from three sources:

The Health Insurance Marketplace® – this is run by the federal government. There are pros and cons to this route, but going to the website will show you the various options and plan pricing offered in your state.

Health insurance broker – this is someone you can work with who will shop it for you and bring back options. It doesn’t cost anything; they get a cut of the premium you pay, and you don’t pay a markup.

Association health plans – professional organizations, membership groups, and unions often have negotiated health insurance plans for their members.  

2. Disability Insurance: Covering the What-Ifs

In addition to health insurance to help cover a portion of your medical bills, disability insurance helps provide financial protection if you’re unable to work due to a disability or illness. Disability insurance offers income replacement, allowing you to cover your essential expenses even when you can't work. Disabilities can range from physical injuries to mental health conditions.  

Bourg notes, “People don’t think about this type of insurance as much, but it can be an important one. I recently had a client out of work for 10 months. The fact that he could keep paying his mortgage and other bills really allowed him to focus on his recovery.”  

Disability insurance may seem less necessary when you're on top of your health game. However, considering that over 25% of our 20-year-olds today will be disabled before they retire, according to the Council for Disability Awareness, it might just be worth every penny.

3. Life Insurance: More Than a Death Benefit

Life insurance can be a gloomy topic, with the primary purpose being to provide a sum of money to your beneficiaries upon your death. However, it can be beneficial during your lifetime too. Some life insurance policies, like whole or universal life insurance, accumulate a cash value over time that can be tapped into later in life to supplement your retirement income or help cover unexpected expenses. 1 2  

There are two main categories: term life insurance and permanent life insurance. While term life covers you for a set amount of time (say, 10, 20, or 30 years), permanent life covers you for your entire life, so long as premiums are paid. The various nuances between these types can shape your decision based on your specific financial goals.

4. Umbrella Policy: The Safety Net You Didn't Know You Needed  

On top of your usual home or auto insurance, an umbrella policy is an additional layer of protection that steps in when your standard insurance maxes out. It can cover things like lawsuits for property damage or injuries, libel, and slander.  

“Umbrella policies typically cover a lot for not a lot of out-of-pocket costs,” Bourg explains.

For freelancers who interact with clients, third parties, or the public, an umbrella policy can safeguard your assets and protect your financial interests in case of a lawsuit or liability claim. It's an affordable way to add an additional level of protection to your freelance business.

5. Professional Liability: The Often-Overlooked Protection

As a freelancer, you're responsible for the work you deliver, and there's a chance that this work could lead to financial loss or harm to your client. This is where professional liability insurance, also known as errors and omissions insurance, comes into play.  

This type of insurance is particularly important for consultants, designers, writers, and other professionals who provide advice, services, or deliverables to clients. Professional liability insurance can cover legal expenses and potential settlements, ensuring that a mistake doesn't result in a financial catastrophe.  

According to Bourg, it’s needed in some industries and not needed in others, but the freelance world can cover a lot of different industries so it’s important to consider your specific work and the clients you have.

Smart Freelancers Know Their Insurance Options

Navigating the insurance space as a freelancer is no walk in the park, but it's essential to ensuring your financial stability and peace of mind. Deciding what insurance you need depends on several factors—your field of work, your health, your financial goals, and your risk tolerance.  

Remember, the purpose of insurance is to protect your income, your health, and your loved ones from unexpected adversities. As growing numbers of people begin freelancing, our understanding of these safety nets becomes crucial. And that is a financial responsibility worth taking on.

Interested in reading more from our financial planning series? Check out our other blogs:

A Freelancer’s Guide to Riding the Waves of Fluctuating Income

4 Ways Freelancers Can Build a Good Financial Foundation

5 Ways Freelancers Can Plan for Retirement and Build Wealth 

1 Some whole life policies do not have cash values in the first two years of the policy and don’t pay a dividend until the policy’s third year. Talk to your financial representative and refer to your individual whole life policy illustration for more information.  

2 Policy benefits are reduced by any outstanding loan or loan interest and/or withdrawals. Dividends, if any, are affected by policy loans and loan interest. Withdrawals above the cost basis may result in taxable ordinary income. If the policy lapses, or is surrendered, any outstanding loans considered gain in the policy may be subject to ordinary income taxes. If the policy is a Modified Endowment Contract (MEC), loans are treated like withdrawals, but as gain first, subject to ordinary income taxes. If the policy owner is under 59 ½, any taxable withdrawal may also be subject to a 10% federal tax penalty.

Peter Bourg is a Registered Representative and Financial Advisor of Park Avenue Securities, LLC (PAS). Securities products/services and advisory services are offered through PAS, member FINRA, SIPC. Financial Representative, The Guardian Life Insurance Company of America® (Guardian), New York, NY.  Park Avenue Securities is a wholly owned subsidiary of Guardian. Ashford Advisors is not an independent registered investment advisor nor an affiliate or subsidiary of PAS or Guardian. Ashford Advisors is not registered in any state or with the U.S. Securities and Exchange Commission as a Registered Investment Advisor. CA Insurance License #0I07706; AR Insurance License #10381689. No compensation has been provided by the adviser in connection with this interview. Wripple is not an affiliate or subsidiary of PAS or Guardian 2023-162979 (Exp. 10/25)

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