Empowering the Freelance Economy

Can freelancers out of work or on holiday pause their business insurance?

Can freelancers pause their business insurance when they are out of work or on holiday? / Photo by Mikhail Nilov via Pexels
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Small business owners and freelancers waste £216m on business insurance when out of work or on holiday, says a new study. Can they pause payments on their insurance?

The average freelancer and small business owner has over two months (65 days) without work each year but is spending on average £108.10 a month on business insurance when they don’t need it.

With 1m self-employed people in the UK who have business liability insurance, that’s an estimated £216.2m each year being wasted on business insurance that small business owners could be saving to cover those times without work – or using towards other costs. This is according to the business insurer, Suited.

The insurer said that during the pandemic, these figures were even higher, with the average freelancer being out of work for four and a half months (135 days), if they had been able to pause their business insurance they could have saved themselves £486.45.

“Our research found that 79% of small business owners have annual insurance policies, despite not working all year round and 68% said they continue paying for insurance when they aren’t working,” said Suited.

Is pausing your business insurance possible or even a good idea?

Over half of small business owners in the Suited survey (57%) said they would like the option to pay for their business insurance only when they need it, pausing their payments when they are out of work or on holiday. But this isn’t possible for all as almost a third (32%) said they have had to pay a fee to change, cancel or renew their business liability insurance.

Suited.Insure, said it saw a gap in the market to offer a flexible, affordable solution for contractors and small business owners and is now offering a flexible plan whereby small business owners pay for their insurance “when they need it, ensuring they are protected when they need it, and saving money when they don’t.”

Suited offers a pay-as-you-go solution, so when business owners are out of work they can pause their policy. It also offers free access to professional advice such as legal advice, tax advice, crisis PR, contracting advice and counselling as part of its insurance package.

Are you paying for the wrong type of business insurance?

The insurer’s research also found that of the 501 small business owners surveyed more than a third (33%) of small business owners don’t have the right insurance to protect their business – 34% claim they don’t need business liability insurance and 23% admit they don’t know what sort of business insurance they need as a self-employed worker. While more than one in five (22%) said they simply can’t afford business insurance.

“However, almost a third (32%) of small business owners have admitted that they have previously run into trouble with clients not paying or even suing them, which ended up costing them on average £1,860 to fix the problem,” said the report.

How much can freelancers lose on chasing clients for payments?

The research found that small business owners spend on average £394 paying for these services. Almost one in five (19%) of small business owners haven’t sought expert advice as they think they can do it themselves, and a further one in 10 just search for solutions online.

However, of those that haven’t used these consultancy services, more than one in five (22%) has admitted it has had an impact on their business, with 50% saying they have lost clients and 33% having unforeseen tax bills.

Freelance Informer Tip

When we work for ourselves saving money wherever possible is so important, but sometimes we put ourselves and our businesses at risk by not seeking external advice. Freelancers and small business owners may not realise they may have free access through their insurance to get the support they need, which could save them thousands of pounds.

However, it would be unwise for any small business owner to not ask an insurer if they would be covered in certain circumstances that are specific to their type of work, whether that’s the building trade, data analysis and IT services, or journalism, etc.

For example, if an insured freelance journalist submitted an article in April 2022 to a client or publication and the article wasn’t published until late May, but a reader brought a libel case against the publication related to the article you wrote, you as a freelancer could be liable.

But what if the case wasn’t brought up against you until June 2022, when you were on holiday or when out of work and you had paused your business insurance? Would an insurer, offering flexible business cover, such as Suited, cover your legal expenses or any related costs since you were insured at the time that the work was done, but not when the case was brought against you? The same scenario could be true for a builder or decorator whose work was found faulty after the work was completed. Never presume with insurers that you are always covered or if the cover is retrospective when payments are paused.

Are you worried about money? Check out IPSE’supcoming webinars to help you make the most of your freelancer income. My Money: A month of financial guidance for freelancers | IPSE

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