Does your side hustle need insurance? Find out how to secure your new business in 2024

Presently, there are 7.5 million gig workers in the UK, with the number expected to rise, as a recent study showed that half of those surveyed felt they needed another stream of income due to the cost-of-living crisis. However, turning a hobby or activity into a job might end up costing you if you do not take the necessary steps to protect yourself.

Rob Rees, Divisional Director of Markel Direct, the specialist insurer of freelancers and small businesses, explains the everyday risks that come with running a business and what you can do to stay protected when launching your side hustle in 2024.

Does your side hustle need insurance?

Having your own side hustle may seem like an easy way to earn some extra cash, but no matter how small your business is, you still may need business insurance. Whether you’re working out of an office or your own living room, if you’re selling products or services to paying customers, you’re running a business. Therefore, you could find yourself legally responsible for any issues that occur in connection with that business.

If your side hustle includes any of the following, you should consider taking out a business insurance policy:

1. Do you use costly equipment that could leave you vulnerable to thieves?

2. Could someone become injured because of your side business (either from your products, or its activities)?

3. Do you manage any sensitive information, or process credit card payments?

4. As you conduct your business’ activities, could you cause damage to any property?

What risks come into play when running a side hustle?

Breaking data protection rules

Before you decide to sell your products on the internet it is essential to have a privacy policy in place, which your potential customers can easily access on your website and other online sales channels. You should also gain an understanding of the General Data Protection Regulation (GDPR), which was legislated in May 2018, as you’ll need explicit consent from your customers before you can share their data with third parties, and if you send any newsletters or marketing emails, you will need to ensure that your customers opt in to being contacted for reasons other than order confirmation and delivery.

You must also be cautious when it comes to taking card payments from customers. For a smoother process and to avoid becoming non-compliant, it’s a good idea to use a third-party payment systems such as Worldpay or PayPal. If your business is based in the UK, make sure the payment system you decide to use adheres to UK/EU data protection standards. You can read up about your data protection responsibilities on the Information Commissioner’s Office (ICO) website.

Managing data protection can be a stressful task for small businesses, so to make sure you remain compliant, it’s worth finding out if you can access expert legal guidance through a membership organisation or your own insurer. At Markel Direct, we provide our policyholders with a 24-hour legal advice helpline. We can also provide legal document templates in our Business Hub, which can give you peace of mind and allow you to focus on running your side hustle or small business.

Falling victim to cybercrime and data breaches

For many people, running a side hustle may involve selling your products online, and small traders are usually the most vulnerable as cybercriminals are privy to the fact that online protections are likely lower for smaller businesses compared with larger companies. In fact, our survey showed that 51% of SMEs have been the victim of a cyber security breach.

A cybercriminal could steal your sensitive data, including customer data, resulting in you needing to inform the ICO of a data breach. These attacks not only impact a business financially, but can also lead to:

1. Damage to your reputation, which can make it difficult for you to win new business 2. Your current clients losing trust in you and therefore impacting possible future revenue 3. Potential penalties/fines that can lead to significant revenue loss
4. Your clients submitting a negligence claim, which may result in you having to pay compensation

Thankfully, there are steps you can take to avoid the above happening. Making sure that your anti-virus software and firewalls are up to date, changing your password regularly, and having two-factor authentication enabled for any logins can lessen the likelihood of a hacker accessing your business’ records. By arranging cyber and data risks insurance, you can cover your business if you do fall victim to a cyber-attack. Your insurance should cover the legal costs involved, as well as the costs of replacing or restoring any equipment. If the worst should happen and you fall victim to a malicious cyber-attack, cyber insurance can cover  the costs of restoring data and equipment, loss of your net profit and even meeting ransom demands.

Your equipment being stolen

Transforming your hobby into a side hustle can, in some cases, require using expensive tools. For example, photographers’ kits are often targeted by thieves due to their high value, and the ease of re-selling it once stolen. For people undertaking manual work, the theft of tools can result in being unable to work for days. You can find out about the impact of tool theft on the trades sector in greater detail by reading our latest study here.

Never leaving your equipment unattended greatly reduces the likelihood of it being stolen – but if this isn’t always possible, ensure it is stored out of sight and in a locked place that only you have access to (such as a car boot). When expensive equipment is at stake, it’s also worth considering tools and equipment insurance to protect yourself financially should the worst happen. If your tools or equipment is lost, stolen or damaged, tools insurance can cover the cost of replacing or repairing the equipment.

Your products causing injury to a customer

Injuries or illness resulting from a product you have provided could quickly wreak havoc for your side hustle and see you out of pocket if compensation needs to be paid. For example, a customer could have an allergic reaction to a handmade bracelet ordered online, or to a box of homemade cookies. If any materials or ingredients were not labelled clearly in the product description, you - the business owner - are at fault and the customer could take legal action.

Similarly, if you are a craft seller – such as a candle maker - and you decide to sell your wares on a stall at a craft fair, this will put you face to face with more of the public. When managing a physical stall, dealings with the public are far more common and therefore the risk of injury to third parties is increased. For example, if a customer trips over any loose wires when walking around your stall and injures themselves, they could make a claim against you. The same is also true if they injure themselves or an item of their private property is damaged when at your stall.

If the nature of your side hustle could potentially cause injury or property damage to a third party, you should consider arranging public and product liability insurance to cover yourself against possible claims.

Inadvertently breaking distance selling regulations

There are several laws and regulations if you sell online, and if you’re not fully aware of them, you could find yourself in trouble. You can start to understand the rules for online distance selling by reading the government guide to online and distance selling for businesses (or, if you are a Markel Direct policyholder, taking a look on the Business Hub).

Examples of the type of information you must ensure you give your potential customers include your terms of service, cancellation terms, delivery costs and a copy of the contract (by email or another format) that the customer can save for future reference.

If you’re an online retailer, craft business or sole trader looking for a quick business insurance quote for your side hustle, click here.