Why gig workers need business insurance

Along with recent advances in technology that make on-demand work much easier, younger generations’ attitudes toward the traditional employment model have shifted dramatically. As a result, about 36% of U.S. workers are part of the gig economy, and if the growth maintains its current rate, more than 50% of Americans will participate in this type of job by 2027.

But does the flexibility and independence offered by gig work mean standard business practices, like carrying commercial insurance, are unnecessary? Far from it. In fact, getting set up with the right business insurance policies is one of the best ways gig workers can protect themselves and their hard-earned money. But there are a few factors that should be considered to make sure you get the right coverage you need at the best cost.

A gig worker is someone who operates outside the standard, long-term employer/employee relationship. The term was coined from the idea that their wages come from the variety of different jobs—or gigs—they perform, either for one company or a variety of clients. There are three types of gig economy workers, but the classifications are loose.

Although it’s a general term, a self-employed worker, like a sole proprietor, creates their own business that caters to a wide variety of clients on an ongoing basis or as a one-off job. Self-employed workers can include:

• Dog walker
• Pet trainers
• Handymen/handywomen
• Wedding photographers

A contract worker (also sometimes called an independent contractor or freelancer) is typically specialized in a particular field, such as marketing, tech, or design. As the name implies, they're contracted by a particular company to complete a specific job or project. Today, many creatives fall into this category, such as:

• Social influencers/YouTubers
• Podcasters
• Writers/authors
• Graphic designers

Gig platform workers rely on apps that let them search for and accept on-demand work. Some of the most well-known platform categories are:

• Food delivery (DoorDash, Grubhub, Postmates, Uber Eats)
• Grocery delivery (Instacart, Shipt)
• Ridesharing (Uber, Lyft)

Even though gig work may seem like it’s a non-traditional way to make money, at the end of the day, you’re self-employed. That means in the eyes of the IRS, you're an independent contractor, and your gig job is considered your “business.”

If you don’t register your small business as a specific entity (like an LLC or an S corp), you won’t need an employer identification number or EIN. You will simply file your taxes using your Social Security number. There are pros and cons of registering a business—such as financial protections—so you may want to research the topic a bit more, especially if your gig work turns into less of a side hustle and more into lucrative money.

Regardless of how you file your taxes, as a gig worker you'll want to have small business insurance. Knowing exactly what applies in your situation is key to having the proper protection to cover you in case something unforeseen comes up.

There are a few categories of insurance you'll want to consider, including:

General liability insurance is the broadest category and the first type of coverage you should look at as a gig worker. Think of it as a wide safety net for your business.

It covers common third-party risks like physical injuries or property damage – such as if a customer brings their dog to your house for training and slips on your front porch, or if you accidentally drop a ceiling fan you’re hanging at a client’s home and ruin their floor. But it can also cover less obvious damages, such as personal and advertising injuries, like if you’re sued for copyright infringement.

In all cases, liability coverage is there to protect from claims that come from people outside your business. The policy covers legal defense costs in the above scenarios and can help pay other expenses.

If your work is seasonal or projects come on a very infrequent basis, then you can also consider short-term general liability insurance. But often, year-long general liability insurance is less expensive over time and can offer more peace of mind.

Professional liability insurance, sometimes called errors and omissions (E&O) insurance, protects you from clients who feel your work was unsatisfactory. This coverage can also be called malpractice insurance for healthcare workers and legal professionals.

Maybe a client says you missed a deadline, or you made a mistake, or overlooked something in your work. They could sue you for the time it took to fix the problem and the loss in revenue. Professional liability covers legal defense costs in these instances.

E&O insurance is designed for gig workers with a certain expertise, such as writers and graphic designers. Because these gig workers are being hired for their specialized skills, they're bound to a reasonable standard of care and could be accused of professional negligence if their client feels they don’t meet expectations.

If you own a car, you’re required to have insurance. But if you’re a gig worker that uses your personal car, then your personal auto insurance likely won’t cover you if you’re in an accident while doing anything business related. That includes making deliveries, transporting passengers, or just doing an errand. If it’s part of your gig work, then your auto insurance policy won’t be enough.

Instead, you need hired and non-owned auto (HNOA) insurance. It covers liability expenses like property damage and bodily injury for car accidents that occur in your car for business purposes. If you don’t have your business registered as a special entity, then this type of insurance is especially important, because your business doesn’t own your vehicle and would not be covered under a commercial or personal policy.

Another option is to get a special rider on your personal auto policy. Endorsements like rideshare insurance, courier insurance, or on-demand insurance can sometimes be added to your personal policy for an extra premium. However, not all states allow rideshare endorsements and some insurance companies don't provide them.

Workers’ compensation insurance covers costs related to workplace injuries and illnesses, including medical expenses, lost wages, legal fees, and even death benefits. Workers’ comp is mandatory in most states if you have one employee (part- or full-time) or more.

If you don't have employees, then it may not be required – it all depends on the rules where you live. However, getting workers’ compensation coverage as a gig worker might be a good idea since regular health insurance plans may not cover work-related healthcare costs. Another big bonus is that disability insurance provided through workers’ comp can supplement your income if you can’t work because of an injury on the job.

When it comes to the gig economy, there isn't a one-size-fits-all business insurance package. Every situation is different and depends on factors like type of work, income level, and risk tolerance. Therefore, you should take time to think about your coverage options to determine the best policies to suit your needs.

For instance, if you work for a gig platform like Uber or Lyft, or you’re a food or grocery delivery driver, you need auto insurance that covers your gig work. But you probably won't need something like professional liability insurance. On the other hand, if you’re a fully remote writer or designer who does all your meetings over Zoom, you don’t need auto insurance, but professional liability is essential.

It’s also important to research your state and local laws. Insurance regulations differ from one location to another, and they're constantly changing, especially for something evolving as fast as the gig economy. You want to make sure you're following all legal requirements when it comes to what insurance to carry.

Once you figure out what type of coverage works best for your situation, you can then customize the policy so it aligns with your insurance needs and budget by tweaking the policy limits, deductibles, and so on.

While insurance options may seem endless and all of this may sound overwhelming, you don’t need to get anxious about this aspect of your gig work. Insureon is the expert in commercial insurance—including for gig workers—and we can help you navigate the insurance maze. Our goal is to help you understand what insurance products you should have as a gig worker and help you get the best rate possible.

Insureon has licensed agents in every state and field, and we have industry specialists on hand to find the best coverage to meet your needs as a gig worker. You can get quotes from top-rated U.S. insurance providers by completing Insureon’s easy online application. Then, once you select your policies, coverage can begin in less than 24 hours.