Glossary of Business Insurance Terms
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A freelancer is a type of independent contractor. Though the terms essentially mean the same thing, freelancers typically work in a creative field.

What is a freelancer?

A freelancer is an independent contractor who is self-employed and typically works in a creative field, such as audio or visual recording and editing, web design, graphic design, social media, copywriting, and copy editing.

Freelancers are hired on a part-time or short-term basis. They may have several clients at once, doing work for each of them as needed. They might perform steady work for one client at a time, usually until a project or series of projects are completed.

Many freelancers set their own schedule and rates that could be by the hour or per project. Some freelancers also have a regular, full-time job, and perform freelance work as a side hustle for additional income.

For example, a freelance writer, freelance journalist, or a copywriter might get paid at an hourly rate to work for a specified number of hours per week, or they might do freelance writing on a per-project basis and receive a set amount when the project is complete.

They typically pay self-employment taxes on their own and may receive a 1099 form that indicates the income they received from a client.

Some freelance workers find freelance jobs through a staffing agency, which withholds their income taxes, similar to that of someone with full-time employment. The agency may or may not provide benefits as long as the freelancer is working a minimum number of hours per week.

Those in freelance careers often do remote work, especially in today’s gig economy, although some full-time freelancers do work on site, if required by a client.

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How do freelancers differ from independent contractors?

The definition of freelancer vs. independent contractor is the same in terms of reporting income to the Internal Revenue Service (IRS), although there are differences between the two in the nature of their work.

The term “freelancer” is often used for those working in creative fields under short-term contracts, under agreements that define the scope of a project, its cost, or their hourly wage.

Independent contractors typically work under a contract with the client that specifies the scope of a project, their responsibilities, deadlines, and costs. Contractors may perform work on a long-term basis.

What are the advantages of being a freelancer?

Freelancing allows someone to be their own boss and to choose which projects they work on, the amount of money they’re willing to accept, and where and how the work is performed.

What are the disadvantages of freelancing?

As a business owner, you could be subject to lawsuits over injuries, property damage, or financial damage related to your work. If you were an employee, your employer would likely face this litigation instead.

For example, IT consultants who freelance could face a lawsuit if they recommend insecure software or overlook a security flaw that leads to a data breach.

How can you reduce freelancer business risks?

Freelancer Business Insurance can reduce the financial risks of a costly lawsuit over the quality of your work.

General liability insurance protects you from lawsuits over third-party injuries or property damage. If you damage someone’s property while working on a photo or video shoot, they could sue you for the cost of repairs. If a graphic designer exposes a client to cyber hacking or a loss of data, the client could sue for the financial damages it causes.

Professional liability insurance (or tech E&O for IT freelancers) protects you from lawsuits over accusations of missed deadlines, budget overruns, or poor-quality work.

Workers’ compensation insurance, while not typically required for freelancers, can pay your medical bills and lost wages if you’re injured on the job.

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Updated: April 29, 2022
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