Ask HN: How Do I Get Liability Insurance for Freelancing, Side-Projects?
14 comments
I am not a lawyer.
1. Talk to an attorney regarding liability.
2. Talk to an insurance agent regarding liability insurance (and perhaps product insurance).
3. Consider using a CPA or perhaps an Enrolled Agent for bookeeping.
You might want to steer clear of calling your business or classifying its services as software engineering and stick with 'development' or programming because 'engineering' may create an expectation of a higher standard of care than is typical in the world of software development or programming.
Regarding insurance, insure against your actual risks and/or in accord with a client's contractual requirements. What I mean is that until the company has delivered software to a client, liability exposure (beyond anyone can sue anyone) is very very low. A few small websites have a different risk profile than embedded control systems for avionics.
Finally, if $1000 a year is a make or break business expense, it might be better to line up some work before spending the money and to include enough fee to cover such expenses.
Good luck.
1. Talk to an attorney regarding liability.
2. Talk to an insurance agent regarding liability insurance (and perhaps product insurance).
3. Consider using a CPA or perhaps an Enrolled Agent for bookeeping.
You might want to steer clear of calling your business or classifying its services as software engineering and stick with 'development' or programming because 'engineering' may create an expectation of a higher standard of care than is typical in the world of software development or programming.
Regarding insurance, insure against your actual risks and/or in accord with a client's contractual requirements. What I mean is that until the company has delivered software to a client, liability exposure (beyond anyone can sue anyone) is very very low. A few small websites have a different risk profile than embedded control systems for avionics.
Finally, if $1000 a year is a make or break business expense, it might be better to line up some work before spending the money and to include enough fee to cover such expenses.
Good luck.
Thank you so much!
As a freelancer with no employees you don't need any of this. LLC gives no tax advantage in your case, and you can't get insurance to cover you if you don't deliver on your commitments or break the law (i.e. using copyrighted material).
You don't need any of the trappings of a "real" business. You need customers and some basic understanding of contracts.
You don't need any of the trappings of a "real" business. You need customers and some basic understanding of contracts.
OP seems more concerned with liability protection than tax advantages.
Yes. I am more concerned about Liability. @gregjor addressed this in his other reply. And it makes sense. I guess rather than trying to get Liability Insurance, I should reduce my risk exposure by having a Contract Lawyer draw up a clear, comprehensive contract for the software work?
You need a contract but be careful paying for a lot of boilerplate. Most things you see spelled out in contracts are matters of law, and contracts can't override or nullify state and federal law. For example in many jurisdictions contract disputes (and many other civil suits) for small-ish amounts of money automatically go to mediation to keep the courts clear of he said/she said cases, regardless of what the contract might say. Don't expect your case to hinge on clever wording in the contract, it doesn't work that way. Mediators and judges look at what was promised and reasonably expected, what actually happened, and what could have been reasonably foreseen. They don't pay attention to technical details of the contract.
I have served as an "expert witness" in several software project breach of contract cases, and I routinely take over projects after the developer and customer have parted ways. To protect yourself be very clear on the deliverables, the expected payment, and who is responsible for what. The primary mistake both sides make is not defining deliverables in a way that can be measured. Over and over I see major projects described in a few vague sentences with a fixed fee for everything, and that's almost always going to go bad because neither side can predict the future, and neither side has clear expectations.
Unless you have significant experience and are working with a client you trust and understand, keep the deliverables small and manageable, so you can clearly define them. If you promise something like "new e-commerce web site" that leaves just too many opportunities for misunderstanding. I usually spend my first few consulting hours (paid) helping the customer define their priorities and turning those into defined deliverables, so we both know what "done" means. The more ambiguity and vagueness in the agreement the more likely it will turn into a misunderstanding and then a lawsuit.
It's normal for project requirements to change during development. It's normal for the developer to run into unexpected technical problems. It's normal for customers to misunderstand or change their mind after they've agreed to something. It's normal for customers to not have their deliverables (business rules, assets, data, etc.) in the usable state they promised. Anticipate these things, they are routine, not exceptions, and build those into your process and your agreement.
I have served as an "expert witness" in several software project breach of contract cases, and I routinely take over projects after the developer and customer have parted ways. To protect yourself be very clear on the deliverables, the expected payment, and who is responsible for what. The primary mistake both sides make is not defining deliverables in a way that can be measured. Over and over I see major projects described in a few vague sentences with a fixed fee for everything, and that's almost always going to go bad because neither side can predict the future, and neither side has clear expectations.
Unless you have significant experience and are working with a client you trust and understand, keep the deliverables small and manageable, so you can clearly define them. If you promise something like "new e-commerce web site" that leaves just too many opportunities for misunderstanding. I usually spend my first few consulting hours (paid) helping the customer define their priorities and turning those into defined deliverables, so we both know what "done" means. The more ambiguity and vagueness in the agreement the more likely it will turn into a misunderstanding and then a lawsuit.
It's normal for project requirements to change during development. It's normal for the developer to run into unexpected technical problems. It's normal for customers to misunderstand or change their mind after they've agreed to something. It's normal for customers to not have their deliverables (business rules, assets, data, etc.) in the usable state they promised. Anticipate these things, they are routine, not exceptions, and build those into your process and your agreement.
I'm not sure it's an either or scenario. Personally I've had my lawyer draft up a comprehensive Master Service Agreement but I'm not sure that it replaces E&O. That said, the provision in my document is about work being done in a "workmanlike manner".
Check this one out:
https://www.techinsurance.com
You will usually need 2 types of insurance:
1. General Liability
2. Errors and Omissions (E&O) which can be optional but covers things like customer data loss etc.
https://www.techinsurance.com
You will usually need 2 types of insurance:
1. General Liability
2. Errors and Omissions (E&O) which can be optional but covers things like customer data loss etc.
Read what the coverages actually mean first.
http://www.techinsurance.com/products/
If you work off-site, don't have employees, don't have people visiting your office, you probably don't need general liability.
I suspect E&O would be prohibitively expensive for a freelancer working from vague requirements.
http://www.techinsurance.com/products/
If you work off-site, don't have employees, don't have people visiting your office, you probably don't need general liability.
I suspect E&O would be prohibitively expensive for a freelancer working from vague requirements.
What kind of liability do you need to insure for? Software development contacts usually don't have a warranty of fitness, and should include standard hold harmless and third-party indemnity language. A malpractice or damages claim would be unusual in the software dev business. Much more likely is breach of contract, if you are late or fail to deliver according to the contract.
You will have a hard time finding any company willing to insure you for breach of contractual obligations. If you are worried about that you should form a corporation to clearly protect your personal assets and engage an attorney.
You will have a hard time finding any company willing to insure you for breach of contractual obligations. If you are worried about that you should form a corporation to clearly protect your personal assets and engage an attorney.
Thanks. I think something in the lines of if the project gets delayed (in case of freelancing) or client is not 'happy' with the deliverables.
In terms of the side project, it's a jobs listing website that I am curating from various feeds from monster etc. Would there be anything in that space I need to 'worry about'? Not doing anything illegal, but I've seen lot of Patent trolls and frivilous law suits, so it scares me.
How much $ amount should I try to get for?
In terms of the side project, it's a jobs listing website that I am curating from various feeds from monster etc. Would there be anything in that space I need to 'worry about'? Not doing anything illegal, but I've seen lot of Patent trolls and frivilous law suits, so it scares me.
How much $ amount should I try to get for?
I'm not a lawyer. You should get legal advice.
Liability insurance is for damages you or someone working for you causes, like knocking a server over or erasing a database. Freelancer vs. customer disputes over deliverables and schedule or payment generally lead to a breach of contract lawsuit, which I don't believe you can insure against except perhaps to limit damages. The best protection is to have a good contract, well-defined deliverables, and good communications with the customer.
Curating content from other web sites sounds like a possible intellectual property problem. Just because something is freely available on the web doesn't mean it's not copyrighted IP.
Also be aware that contracts, copyright, and IP are covered by state and federal law. A contract cannot override or nullify existing law.
Liability insurance is for damages you or someone working for you causes, like knocking a server over or erasing a database. Freelancer vs. customer disputes over deliverables and schedule or payment generally lead to a breach of contract lawsuit, which I don't believe you can insure against except perhaps to limit damages. The best protection is to have a good contract, well-defined deliverables, and good communications with the customer.
Curating content from other web sites sounds like a possible intellectual property problem. Just because something is freely available on the web doesn't mean it's not copyrighted IP.
Also be aware that contracts, copyright, and IP are covered by state and federal law. A contract cannot override or nullify existing law.
I use techinsurance.com as some of my DevOps training and consulting clients require insurance, both E&O (errors and omissions) and GL (general liability).
I'm paying ~$225/mo. for $1M/$1M/$500K coverage on general liability/professional liability/worker's comp. I get it from The Hartford.
My tax lady says that Single-Member LLC do not offer that much protection in terms of Liability, and that CA also charges 800$ / year for LLC Fee. Add Tax prep fee, it goes over 1000$.
Instead, she said I should get "Liability Insurance" for my Software development work. She wasn't aware of any Company that does Tech (since it's so new as a Profession, i.e. only few decades old).
Do any of you have recommendation for getting Liability Insurance for a Freelancer as Sofware Engineer / Developer? Also, what amount is recommended and which companies do this?