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Insurance and Bonding Advice for the Self-Employed

Jun 12, 2017

Guest Post by Vic Lance
Vic Lance is the founder and president ofLance Surety Bond Associates. He is a surety bond expert who helps business owners get licensed and bonded. Vic graduated from Villanova University with a degree in Business Administration and holds a Masters in Business Administration (MBA) from the University of Michigan’s Ross School of Business.

Many professionals who want to keep their independence choose the path of the self-employed. While it requires you to keep track of a number of legal and administrative details, it’s also a rewarding way to earn a living.

If you’re just starting out as a micro business owner or a freelancer, you may need to get acquainted with the numerous criteria you need to meet to register or get licensed. Depending on your field of activity, getting proper insurance and surety bonds may be among these requirements. Whichever professional direction you have taken, it’s a good idea to ensure your legal compliance.

Besides being required from authorities, obtaining insurance and surety bonds may be simply in the interest of your work. In a number of cases, insurance guarantees you will not suffer financial losses due to unforeseen circumstances. As for the latter, bonding is often a strong sign of your trustworthiness to your customers, which makes you a more attractive business partner.

Here’s a brief overview of what you need to know about insurance and bonding as an independent specialist.

The basics about insurance for self-employed
For some independent professionals such as construction contractors, insurance is a fact of life. They are not permitted to operate without a number of insurance policies.

In other cases, being insured may not required by law, but is highly recommended. Instead of risking your whole business for a moment of inattention, or because of unpredictable factors, you’re much safer if you have the proper coverage.

The typical self-employed insurance types are a few. It’s a wise step to get Professional Indemnity Insurance (Errors and Omissions Insurance). It protects you in cases of negligence claims and civil lawsuits against you. Many professionals obtain such insurance, including real estate brokers, IT service providers, architects, engineers, and attorneys, among others.

Another type of insurance that you may want to obtain is General Liability Insurance, also known as Commercial General Liability (CGL). It can offer protection for general business risks, including bodily injury and property damage. Additionally, you may also want to get Property Insurance for your business location and Commercial Auto Insurance for any vehicles you use for business. You can also get a Business Owner’s Policy (BOP), which covers a number of the other insurance options.

What you need to know about surety bonds
For many professional occupations, you need to get bonded as a part of the licensing or registration process you have to undergo. Auto dealers, freight brokers, construction specialists, mortgage brokers, insurance agents, and health care providers are only some of the specialists who often need to post a certain type of surety bonds called license bonds. They guarantee that the bonded party will abide by the law and will follow the licensing body’s requirements.

Other types of professionals, such as sellers of alcohol, tobacco or fuel, have to obtain sales tax bonds. Their purpose is to ensure the due payment of taxes and fees incurred during sales. Construction contractors who want to bid on projects typically need to obtain contract bonds. They guarantee completion of projects.

For all these bond types, you are liable to repay any affected parties in case there is a proven claim against your bond. This means that surety bonds protect your customers and the licensing bodies rather than you.

In some cases, independent professionals may also need to get fidelity bonds. If you run a business whose employees work in customers’ homes or offices, for example, you’d need to post such bonds. In this case, the bond provides you with a compensation in case you become the victim of employee dishonesty.

Over to you
What’s your experience with getting insured and bonded as a self-employed? Please share your firsthand knowledge in the comments below.

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