This article was contributed to us by lancerX, a community that aims to empower freelancers in Singapore to streamline their business so they can focus on their craft.
When starting out as a freelancer, you might make a list of things to buy to get your freelance business up and running. For example if you’re a freelance video editor, maybe you need to upgrade your editing rig, stock up on spare hard disks, get an ergonomic office chair etc.
Here’s one more thing that you should consider adding to your to-buy list: insurance. Buying the right types of insurance can actually protect you from incurring a massive financial burden should misfortune strike.
In this guide, we’ll cover some reasons why freelancers should consider buying insurance, the various types of insurance that freelancers should consider buying and some alternatives to buying insurance. If you need advice on the insurance policies that would be suitable for you, do speak to a trusted financial adviser.
Why Do Freelancers Need To Have Insurance?
Firstly, sh*t happens. If only every day was a bed of roses, where we didn’t have to worry about catching someone’s flu and being unable to work for the next 3 days. Or you tripping over your laptop’s charging cable and sending your laptop crashing to the floor.
Life is full of uncertainties, and you never know what might happen next that will adversely affect your freelance business (and hence your income stream). Because no matter how much care you take to protect your business, you can’t control everything that happens around you.
For example, some of the losses you suffer could be because someone else screwed up somewhere. Even though you yourself were not at fault at all. That sucks and is totally unfair, but life’s like that.
That’s where having insurance comes in. By paying out compensation for your losses, insurance helps to cushion the impacts of unexpected events on your business.
For sure, buying insurance doesn’t eliminate the risks involved in running a business. But at least if or when sh*t were to hit the fan later on, you won’t have to tank the entire extent of the loss by yourself . And accordingly, you safeguard your bottom line.
Secondly, unlike employees, you don’t get medical benefits.
Employees usually have medical benefits such as paid medical leave and reimbursement for medical consultation fees. Accordingly, employees will still be paid for the days where they are on MC. And they may not even have to pay to see the doctor because their employers will pick up the tab.
But you, as a freelancer who has chosen to strike it out on your own, you don’t get any such benefits. If you fall sick/suffer injury and choose to see the doctor, you will have to foot your medical expenses yourself. Also, if you’re unable to work because you’re unwell, you potentially lose out on jobs. Your earnings may take a hit as a result.
So if you want such benefits, you’ll have to make provisions for them yourself. In this regard, you may want to especially consider income protection insurance and health insurance – more on these below.
Types Of Insurance Policies That Freelancers Should Consider Buying
There’s a whole range of insurance products out there, that cover all sorts of risks. In this guide, you’ll learn the types which are more relevant to freelancers.
Remember that you don’t have to buy every single type of insurance listed here. When deciding which insurance products to invest in, consider what each product covers, your potential future need and how much you can afford to spend on insurance. If you’re unsure, always speak to a trusted financial adviser.
Income Protection Insurance
Even if you’re the healthiest person on Earth, you’re probably going to fall sick at least a few times in your life. If the illness is relatively mild and doesn’t last too long, you may be able to recover from it with little or no negative impacts on your income.
But the nightmare starts if you won’t be able to work for quite some time. Your existing clients may be sympathetic, but ultimately if you can’t deliver what you’d agreed to deliver, expect your earning streams to start drying up as your clients start looking for a replacement.
Specific Income Protection Products For Freelancers
As of writing, there are twoinsurance products which specifically compensate freelancers on medical leave, or in hospital, for any income lost during this period of time. These insurance products are the Freelancer Income Protection (FLIP), and Prolonged Medical Insurance (PML). Their offerings are summarised in the table below:
|FREELANCER INCOME PROTECTION (FLIP)||PROLONGED MEDICAL INSURANCE (PML)|
|Insurer||GigaCover (and underwritten by Etiqa Insurance)||NTUC Income|
|Benefits||Daily cash benefit of $50 to $200, depending on your policy tier||Daily cash benefit of $60 to $80, depending on your policy tier|
|Conditions for payout||
|Cap on number of days that the policy will pay out for||
As you can see, you need to be unwell for a certain period of time before you’ll be entitled to the daily cash benefits. Taking just one day of MC won’t cut it.
Premiums for both FLIP and PML start at around $2/week, which is quite an attractive pricing. But if you do the math, the total amount of coverage you’re getting under these policies is rather modest.
Consider whether such coverage amounts will provide sufficient compensation for income loss for you if you won’t be able to work for a prolonged period of time.
Disability insurance provides a monthly income in the event that you suffer a disability that prevents you from working. This inability to work due to illness or injury must be medically certified by a doctor before you qualify for payouts.
For example, a freelance photographer may be eligible to receive disability insurance payouts upon becoming wheelchair-bound as they can no longer move around to take photos as easily. On the other hand, a freelance writer who becomes wheelchair-bound may not receive any payouts because they still can use their hands to write.
Among other benefits, these products typically offer monthly payouts of up to 75% of your existing income until you recover or until you’re due to retire. Take note that depending on your policy, your disability insurance cover may last until your chosen retirement age.
Income Protection Riders On Personal Accident Insurance Policies
Personal accident insurance (i.e. insurance to compensate for injury suffered from accidents) policies may allow you to add on a rider which compensates for income lost as a result of the accident. Riders are “add-ons” to your insurance coverage.
Some personal accident insurance policies call their income protection riders a “income benefit for temporary total disability” or “temporary disablement benefit”.
If you have such a rider on your personal accident insurance, you can receive a payout compensating for income loss if an accident leaves you unable to work. This payout is typically a few hundred dollars every week and lasts up to around 6 months.
Adding on this rider may be useful if you are already intending to get personal accident insurance. But if you aren’t, you may want to consider buying a different insurance product that specifically provides for income protection, as opposed to this being an add-on feature.
While income protection insurance helps keep your income stream flowing while you’re down with an illness or injury, these payouts aren’t meant to offset your medical expenses. Depending on what you’re down with, these medical expenses can be quite substantial. So you probably don’t want to start work without health insurance, which can help cover your medical bills.
If you’re a Singapore citizen or Permanent Resident, you may be happy to know that you’re already covered with basic health insurance, MediShield Life.
If you need coverage beyond what MediShield Life offers, you can choose to add on a health insurance plan (aka Integrated Shield Plans, or IPs) from private insurers. And for even greater coverage, you can add riders to your IP, which are extra provisions on your IP that boost the protection you get under it.
As mentioned, MediShield Life is compulsory basic health insurance for all Singapore citizens and Permanent Residents.
It is administered by the Central Provident Fund (CPF) Board and you pay the premiums through your MediSave account (i.e. one of the CPF accounts that freelancers are required to contribute to if they’re earning more than $6,000/year).
In return, you get basic coverage if you need to be hospitalised, undergo surgery, or obtain certain outpatient treatments like chemotherapy for cancer. You can check out the full list of MediShield Life benefits from the Ministry of Health website.
However, MediShield Life is “basic” health insurance for a few reasons.
Payouts are pegged at class B2/C-type hospital wards in public hospitals. So if you’re looking to stay in the more expensive class B1/A-type wards in private hospitals (because e.g. you want more privacy as you try and clear work for clients while still in hospital), expect to pay more out of your own pocket. This is because the MediShield Life payouts you receive will end up covering only a smaller portion of your (higher) medical bill.
Also, if your medical condition doesn’t require hospitalisation, it may not be covered by MediShield Life. If so, you’ll have to foot the bill by yourself. As a result, you may want to top up your coverage with an Integrated Shield Plan.
Integrated Shield Plans
Integrated Shield Plans (IPs) are health insurance plans offered by private insurers. These provide even greater coverage than what’s offered under MediShield Life.
Depending on which IP you take up, this greater coverage can come in the form of higher claim limits, claims for pre-hospitalisation (e.g. doctor’s consultation fees) and post-hospitalisation (e.g. follow-up appointments) treatments, as well as entitlements for stays in higher hospital ward classes (e.g. standard rooms in private hospitals or class A wards in public hospitals).
You can do a general comparison of the IPs available in the market from the Ministry of Health website. Boosting your health insurance coverage with an IP will cost you more money. If you want to go ahead, make sure you’ve factored such expenditure into your budget.
Because while both employees and freelancers have to make MediSave contributions, freelancers may feel the loss of this sum more as they have to make the contributions themselves. This is unlike employees, whose MediSave contributions are automatically deducted from their salaries. As a result, the money sort of “never comes in” for them in the first place.
Keep all this in mind as you choose an IP that suits your needs and budget. You don’t want to go for something with coverage that you don’t need, and which you have difficulty affording in the long-term.
Integrated Shield Plans Riders
If you need even more coverage than what you’re getting under a MediShield Life + IP combo, you can add riders to your IP. Riders are provisions in your policy that enhance the coverage under it, compared to what it originally offered. So you get extra protection without having to take up additional separate insurance plans.
But you can’t choose to get just the rider – you have to take up the underlying insurance policy too. Examples of extra coverage you can get by adding on riders to your IP include cash benefits for each day that you’re in hospital, your insurer footing up to 95% of your medical bill, an home visits from a GP (general practitioner), home nurse or other home care medical service providers.
Professional Indemnity Insurance
You may currently be all buddy-buddy with your clients, but expect that “friendship” to evaporate if something goes wrong during a project and you get blamed for it.
If your client has suffered major losses, you may even find an expensive lawsuit knocking on your door, without counting compensation you’ll have to pay if you’re eventually held liable for the client’s losses.
To help businesses guard against legal liability, insurers offer professional indemnity insurance that provides coverage for incidents such as negligent acts or omissions, loss of documents, infringement of intellectual property rights, and defending claims in court.
Apart from taking up your own professional indemnity insurance, some clients may already be insured against third-party claims arising from the acts/omissions of freelancers they engage. So before taking up a project for a client, it doesn’t hurt to ask if the client has such coverage.
For example, if you’re a media freelancer, look out for clients who adopt the Tripartite Standard on the Procurement of Services from Media Freelancers, which requires them to have insurance that covers freelancers for third-party claims. Freelance caregivers on the CaregiverAsia platform will also be covered with Personal Indemnity (Medical Malpractice) Insurance.
Depending on your line of work, you may be working with some pretty expensive equipment that you can’t afford to break/drop/have destroyed by wet weather, etc. And even if you don’t think that you do, at the minimum you will probably have a desktop computer or laptop.
If your equipment isn’t functional, not only will you not be able to work, you’ll also have to repair or replace your equipment. And that will cost money.
You can insure your equipment so any repairs or replacements won’t cost you a bomb later on. This doesn’t always need to be in the form of a formal insurance policy either. For example, getting extended equipment warranties is a good start in the event that your equipment decides to malfunction for no reason.
Alternatives to Buying Insurance
One alternative to buying insurance is to save up. The idea is to build up a reserve of emergency funds that you can tap on during rainy days.
The earlier you start saving, the more you’ll have set aside for use. You can also look into investing your savings to grow them.
Freelancers are recommended to have at least 6 months’ worth of income in savings. However, this is just to cover your living expenses during the times where you’re unable to secure work. To cover your potential medical bills, you’ll need to save up much more than that.
To be honest, saving up such large sums of money for future use can be a challenge. This is especially so for freelancers who are starting out.
As a result, it may still be worth buying certain insurance policies (especially health insurance) which will pay out on your behalf. This way, you won’t have to wipe out so much of your savings should something happen to you.
Buy the Insurance You Need And Can Afford
As you can see, there is a ton of insurance options out there which can help freelancers protect themselves and their business from potential harm.
But while being insured to the gills may sound like an attractive proposition, remember that insurance isn’t free. Even if insurance premiums are marketed as costing only a few bucks a day, all these “small sums” will add up.
Before committing to buy a particular insurance policy (or policies), do your sums so you know the max amount of coverage you can afford without burning a hole in your wallet.
Also, speak to a financial adviser who will be able to advise you on insurance policies that would be suitable for you, based on your needs and budget.