How to profit from the gig economy

Home-based businesses

Many professionals begin their small businesses in their own homes.

Unfortunately, homeowner’s policies don’t cover home-based businesses in the way commercial property insurance do.

If you’re operating your business out of your home, ask your insurer for additional insurance to cover your equipment and inventory in the event of a fire or theft.

Savings and budgeting

The concepts of savings and budgeting may be foreign to many individuals including a gig worker.

As employees, they may have lived paycheck-to-paycheck knowing that their taxes were covered through withholding and that their personal concerns like health care and retirement savings were handled by their employers.

In the gig economy, they must take personal responsibility for all these matters as independent contractors.

Because income from freelancing, consulting, or other contingent work is not necessarily steady and payment of tax is an individual responsibility, it is vital for a gig worker to be proactive in managing their money, tax affairs, and cash flow. This includes establishing a savings program to create a financial cushion for when things are slow or for an emergency.

It also requires careful budgeting so that funds are not frivolously spent when they come in, but are instead applied for various necessary purposes (e.g., to pay for estimated tax payments, to fund retirement savings, and to pay for deposits into a rainy day emergency fund).

Health coverage

One of the prime concerns of most workers today is health coverage.

Many employers offer this benefit to their employees, but those who work exclusively in the gig economy as independent contractors must find their own health coverage.

This may be an additional cost that must be factored into account when computing your profitability.

Disability coverage

For a self-employed or an independent contractor, becoming injured and being unable to work can present a significant financial problem when income cannot be generated.

Employees who are injured on the job have workers’ compensation protection. They may also enjoy long-term disability coverage through their employer.

Gig workers, on the other hand, must take care of themselves by considering privately obtained disability insurance designed to replace a portion of any lost income due to long-term disability.

Retirement savings

Employees in employment may participate in company-sponsored retirement plans, but gig workers must save for their own retirement.

They must determine which type of retirement plan is best for them and be sure to fund it themselves.

Should you be a part-time or full-time contractor?

For most people, being a part-time gig worker can initially be the best option to generate a second income especially when you have a permanent full-time employment.

In the rideshare business, if you drive a fuel efficient car and are willing to work full-time, then it is possible to make ridesharing a full-time gig.

But if you do not drive a fuel-efficient car or a car that requires higher maintenance, then it is not a good idea to drive full-time.

Insurance

From the day an independent contractor or gig worker starts a business, he or she exposed himself or herself to certain risks.

Even before the first employee is hired, it is important to have the right insurance in place. One lawsuit or a catastrophic event could be enough to wipe out a small business before it even has a chance to get off the ground.

By having the right insurance in place, a business can avoid a major financial loss due to a lawsuit or catastrophic event. Check with your insurer to find out what forms of insurance you need for your type of business and put those plans in place as soon as possible.

Fortunately, businesses have access to a wide range of insurance products to protect them against these dangers.

Here are some insurance types that a business must have in place as soon as possible.

Professional liability insurance

Professional liability insurance, also known as errors and omissions (E&O) insurance, covers a business against negligence claims due to harm that results from mistakes or failure to perform.

There is no one-size-fits-all policy for professional liability insurance.

Each industry will have their own set of concerns that will be addressed in a customized policy written for the business.

Vehicle insurance

If your vehicle is used for the business or ridesharing, that vehicle should be fully insured to protect you against potential liability if an accident occurs.

At the very least, businesses should protect against third-party injury, but comprehensive insurance will cover that vehicle in an accident, as well.