The gig is up

It’s National Small Business Week, and while freelance and contract workers aren’t traditionally thought of as small business owners, they are the sole proprietors of a personal business and brand — themselves.

Increasingly, there’s been rapid growth in the so-called gig economy. According to a Princeton University study, the percentage of workers engaged in alternative work arrangements rose from 10.7% in February 2005 to 15.8% in late 2015, while employment in traditional jobs rose by only 0.4% during the same period.

Sometimes referred to as agile workers, gig workers aren’t a new concept, but with the renewed popularity of direct sales companies across a wide range of industries, as well as the astounding growth of things such as ridesharing services like Uber and rental platforms like Airbnb, having a side gig — or two, or three — has never been easier or more profitable.

For all that extra spending money gig workers are earning though, there are some potential risks that go along with the rewards.

Many personal insurance policies do not cover incidents that happen when gig workers are being paid to do a job. According to Ryan Waite, an agent/account executive with Neckerman Insurance Services in Madison, insurance carriers are doing their best to keep up with the new risks that the Ubers and Airbnbs of the world generate, but there is still a lot of legal red tape to update endorsements and coverage.

“This means that if you haven’t talked to your insurance agent about your new gig, you could possibly have a gap in your insurance coverage,” says Waite.

David Montgomery, executive vice president of Madison-based Baer Insurance Services, agrees. “Someone operating a gig economy business needs to contact their personal agent to discuss the scope of their operations and whether there is applicable coverage under the personal auto and/or homeowners coverage. Some companies do offer home-based insurance coverage. Often these are more limited in scope than a business policy.”

In addition to home-based business options offered by some insurance companies, a commercial policy should also be looked into, Montgomery suggests. Commercial policy premiums are often several hundred dollars, he notes, but the coverage is much broader and people being served should feel more comfortable if a business insurance policy is in place.

Coverage is optional

Some insurance carriers do offer coverage for the gig economy, and the number of carriers offering coverage options has been growing rapidly, says Waite. For example, Acuity is now offering an endorsement on personal auto policies to protect their clients who drive for ridesharing companies like Uber and Lyft.

“These rideshare companies typically offer their drivers coverage for the time period after they accept a passenger, but not prior to the pickup when a driver turns on their app but has not yet accepted a ride request and there are no passengers in the vehicle,” Waite explains. “Since your standard auto policy does not cover business use like this, there’s a huge gap in coverage once the app is turned on and there are no passengers. Acuity offers an optional endorsement to help eliminate this coverage gap.”

Waite says there are other options available to gig workers, too, but determining what fits your gig best is best left for a conversation with an individual’s own insurance agent.

Given the state of the workforce and work demands, Montgomery notes insurers are seeing more employers hiring gig workers for short-term work needs or sometimes extended but less than full-time work.

“Many of their employees will require the gig to cover their own general liability and workers’ compensation insurance,” he says. “Their requirement has increased the requests we get for coverage proposals.”

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Risky business

We’ve heard stories about rideshare drivers being mugged or assaulted by would-be passengers, but there are a host of more mundane risks to side gigs, too.

Without additional insurance coverage a gig worker could be on the hook for expenses if, for example, they get into a car accident on the way to pick up a passenger while driving for a ridesharing service, or if merchandise they sell on the side is stored at home and gets damaged or stolen.

“The obvious risks are the liability concerns,” says Waite, “(like) an at-fault accident driving for a ridesharing service while there’s a gap in your auto insurance coverage, or your Airbnb guest suing Airbnb, as well as you personally, and you find out your homeowners insurance won’t cover an Airbnb lawsuit.

“But there are also concerns if you’re hurt on the job,” Waite continues. “Since most of these businesses consider you an independent contractor and not an employee, you are not covered under that company’s workers’ compensation policy in most states. This means that if you’re hurt in a car accident driving for a rideshare service and you can’t work, you won’t be paid for your lost wages or your medical bills. You could have a disability insurance policy to help protect your paycheck, but that’s your only option in most states at the moment.”

According to Waite, besides talking to your insurance agent, another way to feel more comfortable about your protection as a gig worker is to read up on what insurance is offered by the company you work with. “If you run an Airbnb out of your home, do you know what the host protection insurance covers? Equally as important, do you know what it doesn’t cover?

“Purchasing a disability insurance policy is a good idea in case you’re injured doing this work,” Waite adds.

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