Does an LLC Need Insurance If It’s a Side Hustle?

In today’s gig economy, side hustles have become a lifeline for millions. Whether it’s freelancing, dropshipping, consulting, or selling handmade crafts, many entrepreneurs operate their businesses as Limited Liability Companies (LLCs) for legal protection. But here’s the burning question: If your LLC is just a side hustle, do you still need insurance?

The short answer? Yes. Even if your business is small or part-time, risks don’t take a break. Let’s dive into why insurance matters for side-hustle LLCs and how to choose the right coverage.

Why Insurance Matters for Side Hustles

The Rise of the Side Hustle Economy

The gig economy has exploded, with over 50% of Gen Z and Millennials running at least one side business. Platforms like Etsy, Upwork, and Shopify make it easier than ever to monetize skills. But with opportunity comes risk—lawsuits, data breaches, or accidents can derail even the smallest venture.

LLCs Don’t Offer Full Protection

Many entrepreneurs assume forming an LLC shields them from all liabilities. While LLCs protect personal assets (like your home or savings), they don’t cover:
- Professional mistakes (e.g., a client suing for faulty advice).
- Property damage (e.g., a delivery driver crashing their car).
- Cybersecurity threats (e.g., a hacker stealing client data).

Without insurance, you could face crippling out-of-pocket costs.

Types of Insurance Your Side-Hustle LLC Might Need

General Liability Insurance

Best for: Businesses with physical interactions (e.g., pop-up shops, handymen).
Covers:
- Bodily injury (a customer slips at your booth).
- Property damage (you break a client’s laptop).
- Advertising injuries (copyright infringement in your marketing).

Example: A home baker’s LLC gets sued after a customer claims food poisoning. General liability covers legal fees.

Professional Liability Insurance (E&O)

Best for: Consultants, designers, or anyone offering advice.
Covers:
- Negligence claims (e.g., a client loses money due to your financial advice).
- Missed deadlines or undelivered services.

Example: A freelance web designer’s code crashes a client’s site. E&O insurance pays for damages.

Commercial Auto Insurance

Best for: Delivery services, rideshare drivers, or anyone using a car for work.
Covers:
- Accidents while on business errands.
- Damage to goods in transit.

Note: Personal auto policies often exclude business use.

Cyber Liability Insurance

Best for: Online businesses storing customer data.
Covers:
- Data breaches (e.g., hacked client credit cards).
- Ransomware attacks.

Stat: 43% of cyberattacks target small businesses (Verizon 2023).

Home-Based Business Insurance

Best for: LLCs run from home (e.g., crafters, virtual assistants).
Covers:
- Stolen business equipment (laptops, inventory).
- Injuries to clients visiting your home.

Warning: Most homeowners’ policies exclude business-related claims.

When Can You Skip Insurance?

Low-Risk Hustles

If your LLC has:
- No physical interactions (e.g., a blog with no client meetings).
- Minimal assets (e.g., a solopreneur with no employees).
- No industry-specific risks (e.g., writing vs. construction).

…you might delay insurance—but always reassess as you grow.

Platforms with Built-In Coverage

Some marketplaces (e.g., Airbnb, Uber) offer limited insurance for users. Read the fine print—coverage gaps often exist.

How to Get Affordable Coverage

Bundle Policies

Providers like Hiscox or Next Insurance offer side-hustle-friendly bundles (e.g., general liability + E&O for $30/month).

Pay-As-You-Go Options

Usage-based insurance (UBI) adjusts premiums based on your business activity.

Industry-Specific Plans

Associations (e.g., Freelancers Union) often negotiate group discounts.

Real-World Consequences of Skipping Insurance

Case Study 1: The Uninsured Social Media Manager

A freelancer’s LLC faced a $20,000 lawsuit after a typo in an ad campaign caused a client’s sales drop. No E&O insurance = personal bankruptcy.

Case Study 2: The Craft Fair Catastrophe

An artisan’s LLC was sued when a child choked on a loose bead from their product. General liability covered the $15,000 settlement.

Final Tips for Side-Hustle LLCs

1. Audit Your Risks – List potential liabilities (client interactions, data handled, equipment used).
2. Compare Quotes – Tools like CoverWallet simplify shopping.
3. Re-Evaluate Annually – A growing business needs updated coverage.

Side hustles fuel dreams, but one lawsuit can turn them into nightmares. Insurance isn’t just for "real" businesses—it’s the safety net every LLC needs.