By Steve Strauss
Striking out on your own isn’t cheap, and starting a new business will temporarily drain most of your cash reserves. Every penny you can save means more resources and more flexibility for your business. Sure, there are lots of things you’d love to buy, but for the time being, you need to focus on the essentials and cut out all the luxuries.
So what about insurance? When you’re self-employed—whether you are a contractor, a freelancer, or the owner of a small business—insurance can look like a luxury. Why buy something you don’t need right now? Because, as you well know, you never need insurance until it’s too late.
Especially important is that as a solopreneur, you are on your own. Your health, your ability to work, and your reputation are invaluable: without them, your business cannot function. The car you drive, the properties you own, the equipment you use—insurance embodies whatever it protects, and in a sense it is every bit as essential as the thing itself.
So insurance is essential, you know that too. The good news is that many comprehensive insurance plans are less expensive than you might think. The tricky part is finding the right mix of plans. What’s more important, Auto or Renter’s? Liability or Health? It all depends on your needs and priorities. Here then, for your consideration, are five key plans to consider if you’re self-employed.
1. Health Insurance
Numero Uno. # 1. The most important.
Solopreneurs are often preoccupied with health insurance, and it’s easy to understand why. Health care can cost a fortune, and that is why good coverage is essential. Eventually, you will need medical care of one kind or another, and without insurance, even simple procedures can cost an arm and a leg.
2. Disability Insurance
Every year, more than 10% of the American workforce is affected by an accident or illness that leaves them unable to work for a sustained period of time. In the short term, you might be able to support yourself and your family with savings, but if you’re disabled for a period of months or years, then disability insurance can sustain you during your recovery.
Disability typically replaces only about half of your income, so it is still essential that you spend responsibly and save whenever possible while you are healthy.
3. Liability Insurance
General liability insurance covers bodily injuries and property damage resulting from products or services your company provides, as well as any accidents that occur on your property. Professional liability coverage protects you and your business in the event that you are charged with negligence or misconduct.
If you are a lawyer, consultant, or accountant, professional liability coverage helps to ensure that your reputation, and by extension your ability to find and retain clients, isn’t damaged by frivolous or fraudulent charges.
4. Life Insurance
When you’re in your twenties, it might be easy to convince yourself that life insurance is an unnecessary expense, but if you have loved ones who depend on you, your business, and your income, then life insurance coverage is worth purchasing at any age.
5. Renter’s Insurance
If you work out of your home or rent an office, then you will almost certainly benefit from carrying comprehensive renter’s insurance. Renter’s insurance protects your property and assets, including computers and essential equipment. This is a relatively inexpensive way to ensure that your business will be able to recover quickly should you be affected by a fire, natural disaster, or burglary.
Be sure to carefully review any insurance plan you are considering! Insurance only makes sense when it works the way you expect it to—don’t get caught unawares by the fine print. Ask questions, take your time, and never buy a plan that you don’t fully understand.
Steve Strauss is a senior small business columnist at USA TODAY and author of 15 books, including The Small Business Bible.