Insurance Cost and Choices

To all the experienced designers, I have a question about insurances. In our assignment, we’re required to create a business plan. Right now, I’m up to the topic of insurances and wanted to hear from your own experiences. During your careers, did you ever find yourself in situations when you needed a specific one? Are there some you need at the beginning of starting your own business? Or perhaps did you never need to apply for insurance?

Are you speaking as a freelancer type business or an agency?

I’ve been doing this for 32 years and have been insured the entire time, and I’ve never been sued or had a claim filed. I’m perfectly fine with that. I need insurance, it’s the professional thing to do, but I also hope I never have to use it.

In the US, in general, it’s good to have General Liability which includes coverage for premises and operation, contractual liability, personal injury liability, product/completed operation liability, and independent contractor’s liability. If you are going to be using an automobile in the course of your work, it’s good to have Comprehensive Automobile Liability. If you have employees, you may also need Workers Compensation Insurance. It’s also good to have Health Insurance.

If you contract with government agencies, they may require insurance certificates as proof of your coverage. I’ve never had anyone else inquire about my coverage.

What my insurance broker told me is that graphic design is not a business where a lot of us get sued. It’s not like doctors, who get sued constantly. But there is potential liability and insurance can protect your assets. Any client can attempt to sue you for all sorts of reasons, and some people are very litigious. You don’t want to lose your savings, your business, go into debt, or have to sell your house to pay for a judgement against you because you didn’t have protection.

A couple possible scenarios where it would be good for a designer to have coverage:

  • You are producing the marketing materials for your client’s major campaign and have promised delivery on a certain date. They’ve sunk a lot of money into promoting the campaign, like at a convention. You fail to get it done on time. Maybe you got sick, or your computer crashed, but your actions have caused serious financial consequences for the client that they choose to pursue against you.
  • A client comes to your place of a business and becomes injured. Maybe they trip on the door jamb, or a chair falls over on their foot.
  • You are driving to meet a client and are on the clock, and cause an accident with injuries. An aggressive lawyer might attempt to go after your client since you were in their employ at the time.
  • You hire a subcontractor to design a logo, and they plagiarize the design from another company who sues you and your client for violating their trademark, then your client turns around and sues you because they need to scrap everything that they put the logo on.
  • You use a stock photo or illustration that you downloaded from a ‘free’ site, but it was put there by someone who swiped it from Getty, and now the lawyers at Getty are demanding $50k in licensing.
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Almost as important as insurance is to investigate ways to detach your personal assets from your business. In the US, that usually means pursuing an LLC or Corporation designation. It would be wise to consult a lawyer versed in what is needed in your state on this.

I dunno about insurance covering the swiped imagery scenario. That arena is getting more and more “buyer beware” by the day. If you’ve ever read an image license, for as far back as I can remember, if you make the purchase, you agree to indemnify and defend the stock company from any and all litigations against your usage and they outright state they are not responsible for content. Our company policy is not to use “free” sites at all, to do reverse searches, to get direct signatures from the photographer wherever possible, and have our sales rep at the site we use right up the contract in an email for the specific images we purchase. None of the auto-form download stuff.

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The business plan is a great way to start a business - some would argue a necessity. Statistics here at home say the 75% of businesses that have a proper plan at the beginning are still in business 3 years later. The opposite is true, 75% that start without one fail in the first 3 years. I’m in my 10th year on my own, 44 years in the business. I think the type of insurance would depend on your location, as different jurisdictions may have different requirements. A forum frequented by an international crowd like this one can have several varying answers, all of them correct for their particular situations.That said, I agree with the CGL (Commercial General Liability) especially if you perform minor installations on site, but not so much if you’re a freelance designer where I’m from. I think an Errors and Omissions policy might better serve freelance work. I have both - I do light installations and subcontract work as well. In any case, I suggest you speak with a local insurance broker for an accurate answer. One thing is sure, it’s best to avoid having to use it.

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Note: The cost of the policies can easily be controlled through your ability to manage the risk. If you assume responsibility for your work, respect copyrights and deadlines ect., you can purchase coverage based on waving coverage through your own negligence. What this means is if I knowingly do something stupid, then I assume responsibility and pay for my actions. Thus, I don’t do anything stupid… and save on my insurance costs. Some underwriters will consider those situations favorably.

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