Ad Agencies, Freelancers, and Insurance: 5 Things to Know
Advertising and graphic design industries have seen a remarkable shift in the last few years as more small-scale agencies and independent contractors open up shop. If you're one of these many first-time business owners, you've probably wondered about agency insurance.
The first thing to know: when you run your own agency, you're no longer covered by your employer's media liability insurance. Without insurance, you could have to pay for the cost of a lawsuit out of pocket. Time to do your homework on how agency insurance works! It could end up protecting you from a costly lawsuit.
To get started, let's look at three basic insurance options.
Which Coverages Make Sense for Your Media Business?
Small business insurance for media professionals works by helping pay for the cost of unpredictable events like lawsuits, workplace accidents, and property damage covered by your policy. However, there's no single agency insurance policy that covers all these things. In other words, your advertising insurance will actually be a combination of policies.
Depending on the size of your business, the number of employees you have, and how much coverage you need, you may sign up for multiple policies. You may consider…
- General Liability Insurance.
- Workers' Comp Insurance.
- Error and Omissions Insurance.
While there are other small business insurance policies you may want to sign up for (like Property Insurance), we'll focus on these three basic coverages.
5 Things to Know about Marketing, Advertising, and Artist Insurance
As you determine what coverage you want for your advertising agency, these five questions can help guide your decision:
- Who needs their own insurance? Both freelancers and small-business owners should consider signing up for coverage. If you have employees, you may be legally required to have Workers' Comp (more on that below), but other basic agency insurance like General Liability and Errors and Omissions Insurance is often a good idea.
- When should freelancers be covered by their clients' coverage? Say you're a freelance design contractor who works primarily with one client. You've got a long-term gig with the company, and you produce a lot of work them. In this situation, you might ask to be named as an additional insured under their Errors and Omissions Insurance.
- What insurance offers media liability coverage? Errors and Omissions Insurance (also known as Professional Liability Insurance) may cover lawsuits when someone sues you over media liabilities like online copyright infringement, defamation, or missed deadlines. However, this insurance doesn't give you carte blanche. Willful copyright infringement won't be covered. See "5 Online Copyright Issues Every Graphic Designer Should Be Ready to Handle" for more details.
- When does an advertising / design agency need Workers' Compensation Insurance? Workers' Compensation Insurance may be legally required if you employ part-time or full-time staff. Check out Insureon's Workers' Compensation Laws By State guide to read about your state's requirements.
- Do you need Workers' Comp for independent contractors? Say you hire a designer as a contractor. Do you need to have Workers' Comp for the contractor? Probably not. State laws typically only require Workers' Comp for regular employees. But there's a catch. Courts use a "duck test ," asking whether your contractor is a true independent contractor or if they operate more like an employee. As a very general rule, an employee does work your business relies on in order to operate and you direct how that work is done.
Looking to invest in small business insurance? Check out "7 Things to Look for in a Graphic Designer Insurance Policy," which provides a nice summary of what to look for in your agency insurance and translates insurance coverage into plain English.