Is a side hustle a business?
A lot of people hesitate to call themselves business owners. “I just sell a few things online.” “I only photograph weddings on the weekends.”
But your customers don’t see it that way. If something goes wrong — like a customer gets hurt or if you damage someone’s property — your risk and financial loss are as real as someone who works full-time.
The biggest difference in the hobby vs. business debate comes down to one thing: intent. A hobby is something you do for enjoyment. A business is something you do with the goal of making money — even if it’s only part-time.
But part-time work doesn’t mean your risks are part-time. A client can still claim your product caused a financial loss. A package can still arrive damaged. Those risks don’t care whether your business is open 10 hours a week or 50.
Five of the most common business risks to a side business
Many moonlighters and self-employed part-time workers face the same kinds of problems as full-time business owners. The biggest difference? They often don’t expect them. Here are a few situations that can catch side hustlers off guard.
1. Someone gets hurt when you’re working
Let’s say you sell candles at a local craft fair. A customer trips over your display table and suffers an injury.** Even small businesses can face liability claims when accidents happen.
2. A product you make or sell causes damages
If you sell physical products — like handmade jewelry, bath bombs or custom T-shirts — there’s always a chance something won’t go as planned. A customer could claim your product caused an allergic reaction or damaged their property. Even if you believe you did everything right, defending yourself against a claim can cost you time and money.
3. A client says your work caused a loss
This risk is easy to overlook if you sell services. Let’s say you’re a freelance graphic designer and you accidentally use the wrong file for a client’s marketing campaign. If a client says your mistake cost them money, they could ask you to pay for their losses.
4. Your equipment or inventory is damaged or stolen
Many side hustles depend on equipment or inventory, such as DJ equipment, camera and photography gear, or kitchen equipment. If your expensive camera is stolen from your car or a laptop gets damaged by a spilled drink, replacing those items out of pocket can be a major setback.
5. A cyberattack disrupts your business
You don’t have to be a large company to become a target of cybercrime. If you run an online store, save digital customer information or rely on digital payment systems, cyberattacks, phishing emails and data breaches are all possibilities. Even a temporary disruption can mean lost sales and unhappy customers.
When does a side hustle need the protection of business insurance?
Ask yourself this: Could my side hustle cost me money if something went wrong?
If the answer is yes, it’s probably time to consider business insurance.
Business insurance could help protect your small enterprise if you:
And you don’t have to check every box above. Even a one-person business can face unexpected problems. The more your side hustle grows — and the more people, products or customers it involves — the more there is to protect.
Can homeowners insurance cover a side business?
Homeowners insurance won’t usually cover your home business — at least not completely. That’s because homeowners insurance is meant to protect your home and personal belongings — not your business.
While some homeowners policies may include limited coverage for business property, it often isn’t enough for a growing side hustle. The Insurance Information Institute says many homeowners policies limit coverage for business equipment to about $2,500. And these policies generally aren’t meant to help with things like customer injuries, lawsuits or business inventory. That’s a surprise for a lot of people who work a side job.
For example: Imagine you run an online store from your spare bedroom. Your homeowners policy could help if a fire damages your personal belongings, but it may not fully help cover your product inventory.**
Here’s a simple way to think about it:
Homeowners insuranceBusiness insurance
| Helps protect your home and personal belongings | Helps protect your business property and operations |
| May include limited coverage for business property | Can help cover business equipment, inventory and supplies |
| Personal liability for everyday life | General liability for customer injuries and property damage claims |
If you run your side hustle from home, read your policy to understand where your homeowners coverage ends and where business insurance can help fill the gaps.
What type of business insurance could benefit a side hustle most?
It depends on what you do. A freelance writer doesn’t face the same risks as someone who sells handmade jewelry or someone who DJs weddings. The right coverage depends on how you earn money, where you work and the kinds of risks your business can face.
If you sell products
Whether you have an Amazon store or sell at farmers markets, you may want:
- General liability insurance: This could help if someone claims your business caused them bodily injury or property damage. This coverage may also be required if you sell at events like local fairs or food pop-ups.
- Product liability insurance: If you sell physical products, this add-on to general liability could help if a product you make or sell is alleged to have caused an injury or damaged someone’s property.
- Commercial property insurance: This policy could cover some damages to your business inventory, equipment and supplies damaged by a covered event like a fire, theft, burst water pipe or storm damage.
If you provide services
If you work with clients, your biggest risk may be your work itself.
- Professional liability insurance: This type of policy, also called errors and omissions insurance, or E&O, could help if a client claims your professional mistake, missed deadline or professional negligence caused them financial losses.
- General liability insurance: Could help if someone is injured while visiting your workspace or if you accidentally cause damage to someone else’s property.
If you run an online business
Selling online comes with some unique digital risks. In addition to product liability insurance to cover claims of damages from your products and commercial property insurance to help protect your inventory and business supplies, you should also consider:
- Cyber liability insurance: This unique type of policy, available with general liability or professional liability, may help with expenses related to covered cyberattacks, data breaches and other cyber incidents.
If you hire employees
As your side hustle grows, your insurance needs could change.
