In response to my post about being a Ruby on Rails consultant, a few seemed interested in my writing more about the business side of being a freelance developer, so this post is the first in a series on the topic. The first thing I decided to write about is business insurance, since it doesn't seem to be discussed a whole lot in blog posts of this sort.
I was introduced to the world of business insurance by a kind client who suggested I really ought to look into it. It was something that I figured I would get to eventually, but wasn't in a rush to do. After doing a bit of research, though, and getting some insurance for my LLC, I now recommend to anyone that will listen to get business insurance sooner rather than later. If you are looking into getting some insurance for yourself, the first thing you need to know is that there are, in fact, two types of insurance you should investigate.
The first type of business insurance, General Liability insurance, is the kind that most people think about when they think of business insurance. It covers the basics like liabilities arising from operating a business location (a customer slips in your office, sues you, etc.), theft or damage to your business' assets, and other mundane things like that. This type of insurance is a basic requirement of doing business, and is typically inexpensive (less than $1,000 per year). You may not need this if you are working from your home and can get your home office covered under your homeowner's policy, but if you have an office space (even sub-lease) or start to accumulate business assets (even just a wide-screen monitor, new Mac, and a printer can add up), you may want this insurance.
The second type of business is a little less common, but is something you should definitely look into as a freelance software developer: Personal Liability Insurance or Errors and Omissions (E&O) insurance. As the name implies, this type of policy covers being sued for mistakes you make in the course of writing software, deploying systems, etc. and for data loss and other eventualities that might result from your work. This insurance, though expensive, can really save your bacon if things go south on one of your projects. The cost for this coverage can vary widely depending on what types of projects you take on, what types of businesses you serve, etc., but you can count on it being more than $1,000 per year.
If you have little or no clue about where to go to get insurance, check out TechInsurance. I contacted them at the same time I contacted some insurers local to me, and they were more knowledgeable, especially about the E&O insurance and the details of insuring software developers, than the local agents I contacted. Their familiarity with that type of coverage also made them cheaper than the local providers. They were also very helpful in helping me learn more about what coverage I needed.
Now for the disclaimer. I'm neither a lawyer nor a CPA, so this is not professional advice in that sense. This may also be completely irrelevant outside of the US, or even outside of the state of Washington. For real professional advice, go talk to your lawyer or accountant.