With more and more freelance writers shouldering liability risks solo, the pressing question is no longer, “Do I need professional liability insurance?” but rather “How much professional liability insurance do I really need?”
Of course, hammering out the details of an insurance policy should only come into play once you’re confident you’re getting coverage that actually protects you from the risks you face as a freelance writer.
When you’re ready, skip the guesswork by making sure you understand the fundamentals of insurance limits and how to choose a policy that’s sized right for you.
How do insurance limits work, anyway?
An insurance limit is the maximum amount of money an insurance company will pay out to cover your claims. The limit includes two numbers, like “$100,000 / $100,000” or “$100,000 / $250,000.”
- The first number is the “each claim limit,” which is the maximum amount that can be paid out for any individual claim you make.
- The second is the “aggregate policy limit,” which is how much money can be paid out in claims in one policy year.
For example, the $100,000 / $100,000 limit means you can have a claim for $100,000 — or 10 claims for $10,000 each — and that will exhaust your policy limit for the year.
If you choose $100,000 / $250,000, you could have a claim for $100,000 and still have $150,000 left to pay for more claims during your policy period. If you have a claim for $120,000, the maximum payout for one claim would still be limited to $100,000. You would be required to pay the additional $20,000 for the one claim, but you would have $150,000 left to cover other claims during that year.
How do I know which limit is right for me?
There’s no hard and fast rule as everyone’s situation is different. For instance, a political writer contributing to national publications will likely need more insurance than a historian who writes books about the Civil War. If you have a lot of exposure, then you may consider that you are more likely to have a claim or have a more expensive claim. The decision also depends on your risk appetite and how much you want to spend on insurance.
As a rule of thumb, imagine the worst financial loss you could create for your clients, then double it to include legal fees and round it up to the next available limit.
At Dinghy, we find that freelance writers tend to buy one of two limits — either $1M, as that is required by contract, or $100,000, which provides some peace of mind. (However, we have customers that purchase policies with various other limits, too.)
What’s a retention — and how does it affect how much I pay for insurance?
When shopping for a policy, you’ll also need to select your self-insured retention. The retention, similar to a deductible, is the amount you must pay for a claim before the insurance company pays its share of the claim.
For example, if there’s a $5,000 claim made against you and you have a $500 retention, you pay $500 and the insurer pays $4,500. Keep in mind, selecting $0 retention is also an option.
With streamlined digital-first insurance offerings and various coverage options to choose from, you may be surprised at just how affordable freelance writer insurance can be. At the end of the day, with the right protection, you’ll be able to move forward with added confidence and a safety net, if you ever need it.