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Side Hustles Can Be Risky Business: Here’s How to Protect Yours

Maureen Brogie

Maureen Brogie

Senior Advisor at InsuranceBee
Maureen Brogie is a senior advisor at InsuranceBee, a provider of small business insurance. Maureen holds a BS in Finance and is a licensed property and casualty agent in 40 states. Following a career break to raise her twin daughters, Maureen joined InsuranceBee in 2011 and now heads up a busy team of client advisors.
Maureen Brogie

Millennials are embracing the side hustle. And why wouldn’t they, when on average, a side hustle can bring in $8,000 a year? The majority of side hustles don’t cost a lot to get off the ground and provide a great way to supplement an existing income. However, they can be risky business. Why? Because side hustlers’ services could be held accountable in just the same way as a full-fledged business.

It’s easy to understand why side hustles are not being thought of as businesses, because in the traditional sense, they’re not. Thanks to the flexibility they offer, they’re an activity you can fit into your spare time to pull in a few extra bucks, not necessarily a venture you have to invest thousands of dollars into in the hopes that it’s successful enough to keep the cash pouring in.

But what you treat as a side hustle, the customer will treat as they would any other business providing a service, especially if something goes wrong. Luckily, there are a number of ways to safeguard not only income, but also assets, should a customer decide to take legal action.

If you’re operating a side hustle, here’s what you need to watch out for, and how to do it:

General Liability Insurance

If your side hustle means you visit a client’s property, or clients come to your premises, general liability insurance is a must. It protects against claims made against you if a client were to injure themselves, or if you damage their property.

The cost of settlements for this type of claim can be huge. The average payout for a slip, trip or fall caused by a third party is $20,000. So, if your side hustle is cleaning offices in the evening and someone breaks their leg after slipping on your freshly-mopped floor, if you don’t have general liability insurance in place, you’ll be liable for paying legal fees and compensation out of your own pocket.



Business Personal Property Insurance

Even if you work from home, it’s worth considering business personal property insurance, as it covers items that you use to run your side hustle. That includes essential office technology like computers and smartphones, plus any other equipment you use to perform your job, such as a handyman’s tools.

Your landscaping side hustle could come to an abrupt end if your truck were broken into and all of your tools were stolen. Without business personal property insurance, the cost of replacing all of your equipment at once would be so high that even if it didn’t spell the end of your business entirely, it would take a significant chunk of time and money to put things right.

Errors and Omissions Insurance

Errors and omissions insurance, also called professional liability insurance, is highly recommended for side hustlers who provide a professional service, such as design, consulting, marketing or accounting.

Whether the mistake came about because of an error you made, or something you failed to do, errors and omissions insurance can cover the legal costs of defending yourself, as well as the costs of any damages you may have to pay.

If you’re generating some extra income by helping out a small business with their taxes, but failed to file the right form, without errors and omissions insurance, you could be in big trouble. Because if that business receives a fine as a result of your mistake, chances are, they’re going to turn to you to recoup that money.

Contracts and Service Level Agreements

It may seem obvious, but getting an agreement in place before any work is carried out can help to protect you from any unnecessary backlash. By clearly outlining costs, delivery dates and exactly what you will deliver, the chance of a dispute occurring can be significantly reduced. Contracts also provide evidence of what was agreed to if a client decides to proceed with taking legal action against you.


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Is it worth it?

With enough effort and dedication, your side hustle has the potential to blossom into a full-time business, so it’s important to have the right measures in place to protect all your hard work.

Insurance policies for a sole proprietor come in at $500 per year on average, and while that might eat into your side hustle’s profit margins, it can save the day if something goes wrong, even if wasn’t your fault.

There’s no need to over-complicate contracts, either. They should simply state the scope of the project, your terms and conditions and your payments terms. Signed by both parties, your contract will then help protect you if there’s a dispute over what you agreed to deliver.

However, it’s still worth having a legal expert look over a contract to make sure it’s valid. Legal advice can be expensive, but making a one-off payment to have a contract checked over by a lawyer to ensure its validity is cheaper than hiring someone should something go wrong after the fact.

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