
Ask HN: How Do I Get Liability Insurance for Freelancing, Side-Projects? - sean_patel
Hi, I live in California and wanted to incorporate an LLC for my freelance work and side projects, so that I don&#x27;t get sued personally.<p>My tax lady says that Single-Member LLC do not offer that much protection in terms of Liability, and that CA also charges 800$ &#x2F; year for LLC Fee. Add Tax prep fee, it goes over 1000$.<p>Instead, she said I should get &quot;Liability Insurance&quot; for my Software development work. She wasn&#x27;t aware of any Company that does Tech (since it&#x27;s so new as a Profession, i.e. only few decades old).<p>Do any of you have recommendation for getting Liability Insurance for a Freelancer as Sofware Engineer &#x2F; Developer? Also, what amount is recommended and which companies do this?
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brudgers
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.

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sean_patel
Thank you so much!

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gregjor
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.

~~~
tedmiston
OP seems more concerned with liability protection than tax advantages.

~~~
sean_patel
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?

~~~
gregjor
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.

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codegeek
Check this one out:

[https://www.techinsurance.com](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.

~~~
gregjor
Read what the coverages actually mean first.

[http://www.techinsurance.com/products/](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.

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gregjor
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.

~~~
sean_patel
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?

~~~
gregjor
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.

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atsaloli
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).

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akulbe
I'm paying ~$225/mo. for $1M/$1M/$500K coverage on general
liability/professional liability/worker's comp. I get it from The Hartford.

