Insurance is the part of going freelance that everyone postpones, usually until a client contract demands a certificate. It is worth understanding before that happens, because the policy you need depends entirely on what you do, and buying the wrong one is a common and expensive mistake.
The two policies that matter
General liability covers physical things: someone is injured at your workspace, or you damage a client’s property. If you go to client sites, handle their equipment, or have anyone visit you, this is the one.
Professional liability — also called errors and omissions, or E&O — covers the work itself: your advice or deliverable caused a client financial loss. If you are a consultant, designer, developer, bookkeeper, writer or marketer, this is the one.
Most solo freelancers need one of these, not both. Which one depends on whether your risk is physical or professional. A photographer shooting on location needs general liability. A tax preparer working from a laptop needs professional liability.
What it costs in the US
| Policy | Typical annual premium (USD) |
|---|---|
| General liability | $300 – $800 |
| Professional liability (E&O) | $500 – $1,200 |
| Business owner’s policy (bundle) | $500 – $1,500 |
| Cyber liability | $500 – $1,500 |
| Commercial property / equipment | $200 – $600 |
Premiums scale with revenue, claim history and how risky your field is judged to be. A solo writer sits at the bottom of the professional liability range; anyone advising on money or health sits near the top.
What insurance is not
This is the confusion worth clearing up. An LLC and an insurance policy do different jobs.
An LLC separates your personal assets from the business, so a business debt cannot generally take your house. It does not pay anybody anything. If a client sues over work you did, the LLC limits what they can reach — the LLC itself still has to pay, out of whatever it has.
Insurance is the thing that actually pays the claim and, usually more valuably, pays for the lawyer. Many freelancers form an LLC believing it covered them for this. It does not.
The two situations that actually end businesses
A claim you cannot fund a defence for. Most professional liability claims never reach a verdict, but defending one costs real money from the first letter. The policy paying legal costs is worth more than the payout limit for most solo operators.
A contract you could not sign. Larger clients and most agencies require a certificate of insurance before onboarding. Not having one does not cost you a lawsuit — it costs you the contract, quietly, and you rarely find out that was the reason.
When you genuinely do not need it
Being honest about this matters, because insurance is heavily marketed to people who do not need it yet.
- You have no clients yet. Buy it when you have the first contract, not before
- Your work carries no financial consequence for the client and you never visit anyone’s premises
- Your revenue is small enough that you are not a worthwhile target and no client has asked
A freelancer earning $8,000 a year writing blog posts from home does not need a $900 E&O policy. One earning $80,000 advising businesses does.
Buying it sensibly
- Get the client’s actual requirement first. Contracts usually specify the type and the minimum limit. Buy that, not a bundle
- Compare at least three quotes. For identical cover, quotes vary widely between insurers
- Check the retroactive date on professional liability. A policy that only covers work done after the start date leaves your past projects uncovered
- Pay annually if you can. Monthly instalments usually carry a financing charge
Treat the premium as a business cost, alongside health insurance and your quarterly tax set-aside, when you set your rate — not as an afterthought paid out of profit.
The bottom line
Pick general liability if your risk is physical and professional liability if it is the work itself. Expect $300–$1,200 a year. Buy it when a client asks or when a mistake could cost someone real money — and do not mistake an LLC for a policy, because they solve different problems.