This week our blog features guest author Ryan Waite of Neckerman Insurance Services. While it was written pre-COVID, it still holds true and contains some great information for those of you finding yourselves looking at side gigs or maybe even a brand new, full-time freelancing gig. I know many of you are, because we are getting all sorts of start-up questions including ones about insurance. Therefore, I’ll let Ryan take it away.
A labor market characterized by the prevalence of short-term contracts or freelance work as opposed to permanent jobs.
It’s never been easier for people to follow their passions or set up a “side hustle” for extra spending money. Whether it be selling items on Etsy, driving for Uber or Lyft, becoming an Airbnb host, yoga instructor, or selling homemade soap, you can make it happen! But are you adding financial risk in your attempt for financial gain? Will your homeowners insurance or auto insurance protect you if something happens in connection to your business?
All homeowners insurance carriers have different rules and options when it comes to home-based businesses. If you’re with Company X you may find it’s okay to host Airbnb guests a few times per year without adding an additional endorsement. But, if you’re insured with Company Y, they may not renew your homeowners policy if they find out your home is listed on the Airbnb website.
Marketing your business on the internet or social media can increase sales, but it also makes it easy for the insurance company to know if you’re doing something that’s excluded in the policy contract. It’s best to be proactive and call your insurance agent to see what they recommend rather than finding out at claim time that you have no coverage!
The importance of proper coverage can grow exponentially if your side gig is more risky. Driving for Uber or Lyft, running an in-home daycare, and having clients come to your home for appointments or classes are examples of side gigs that could have large potential bodily injury or property damage claims.
It may be in your best interest to set up a separate business owners policy as that can offer much broader coverage. Alternatively, here are a few questions an insurance company will ask to figure out if you can add an endorsement to your homeowners policy:
- How much money does the business bring in each year?
- What services and/or products are offered?
- How much coverage is needed for business-owned property? This includes inventory, furniture, computers, etc.
- How much personally identifiable information do you store? If you’re worried about the repercussions of being hacked, cyber liability on a business owners policy may be a smart move.
If you’re looking for the lowest premium to protect your business it goes in this order:
1) Adding an endorsement to your homeowners policy.
2) Purchasing a policy through a trade association that covers your services.
3) Purchasing a business owners policy.
If you’re looking for the most coverage options to protect your business then the order above is typically flipped.
No matter your side hustle, please remember to consult with your insurance agent, accountant, and attorney to make sure you’re properly protected.
By Ryan Waite, CIC, CPRM, CRM | Insurance & Risk Management
Neckerman Insurance Services