A side hustle is a great way to boost finances during a time when money is tight for most. Currently, there are 7.5 million gig workers in the UK, and the number is expected to increase, as a recent study revealed that half of those surveyed felt they needed a second job due to the cost-of-living crisis. However, turning a hobby or activity into a job could end up costing you if you do not take proper precautions.
Rob Rees, Divisional Director of Markel Direct, the specialist insurer of freelancers and small businesses, explains the common risks associated with running a business and what you can do to protect against them if you are considering starting a side hustle in 2024.
Does every side hustle need insurance?
Having a side hustle may seem like a simple way to boost cash flow, but even if you’re running a business out of your bedroom, your side hustle may require you to have insurance. No matter how small the job is, if you’re selling goods or services to paying customers, it counts as a business. Therefore, you’re liable for any issues that arise in connection with that business.
If a side hustle includes some of the following, taking out a business insurance policy should be considered:
- Could anyone potentially get hurt because of your side business (either from its products, or its activities)?
- Could you cause damage to property in the course of your business’ activities?
- Do you handle any sensitive information, or process credit cards?
- Do you use expensive equipment that could be attractive to thieves?
What are the risks involved with running a side hustle?
Falling victim to cybercrime and data breaches
Running a side hustle for many includes online selling, and small merchants are usually the most vulnerable as cybercriminals are aware that the level of protection is lower than in larger companies. In fact, our survey showed that 51% of SMEs have been the victim of a cyber security breach.
A cyber-attack could involve stealing sensitive data, including customer data, and result in you needing to inform the ICO of a data breach. These kinds of attacks not only affect a business from a financial point of view, but can also lead to:
- Loss of trust from existing clients and loss of future ongoing revenue
- Damaged reputation, making it harder to win new business and recover
- Negligence claims from clients, which result in damages and compensation payments
- Potential penalties/fines leading to significant revenue loss
Thankfully, there are steps you can take to protect against the above happening. Ensuring your anti-virus software and firewalls are up to date, changing your password regularly, and enabling two-factor authentication for any logins can minimize the chances of a hacker gaining unauthorized access to your business’ records. Additionally, arranging cyber and data risks insurance can cover your business if you do fall victim to a cyber-attack by covering the legal costs involved, as well as the costs of restoring data and equipment.
Breaching data protection rules
Before you sell online it is important to put a privacy policy in place, which can clearly be accessed by your potential customers on your website and other online sales channels. You should also familiarise yourself with the General Data Protection Regulation (GDPR), which came into force 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/mailers, you will need to ensure that your customers opt in to being contacted for purposes other than order confirmation.
You must also be careful when it comes to taking card payments from customers; for ease and to avoid potential non-compliance issues, it is best to use renowned third-party payment systems such as Worldpay or PayPal. If trading in the UK, ensure the payment system you opt for uses UK/EU data protection standards. You can find out more about your data protection responsibilities on the Information Commissioner’s Office (ICO) website.
Data protection can be a minefield for small businesses, so to ensure you’re compliant, it’s worth checking if you have access to expert legal guidance through a membership organisation or your insurer. At Markel Direct, we provide our policyholders with a 24-hour legal advice helpline, as well as access to legal document templates in our Business Hub, which gives added peace of mind for those that run a side hustle or small business.
Your products causing injury to a customer
Injuries or illness resulting from a product you have provided could quickly close a side hustle and see the owner out of pocket should compensation need to be paid. For example, a customer could have an allergic reaction to a handmade necklace ordered online, or to a box of homemade brownies. If materials or ingredients were not specified 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 running a physical stall, interactions with the public are far more common and therefore the risk of injury to third parties is heightened. For example, if a customer trips over a cable when walking around your stall and injures themselves, they could have 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 to a third party, you should consider arranging public and product liability insurance to cover yourself against possible claims.
Your equipment being stolen
Turning a hobby into a side job can, in some cases, include using expensive equipment. For example, photographers’ kits are often targeted by thieves due to their high value, and the relative ease of re-selling it once stolen. Or, if for people undertaking manual work, the theft of tools can result in being unable to work for days.
Never leaving equipment unattended significantly reduces the chances of it being stolen – but if it isn’t always possible, always ensure it is stored out of sight and in a locked place that only you have access to (such as a car boot). When pricey equipment is at stake, it’s also worth considering tools and equipment insurance to protect yourself financially should the worst happen.
Inadvertently breaking distance selling regulations
There are several laws and regulations if you sell online, and if you’re not fully conversant with them, you could find yourself in hot water. You can start to get to grips with 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 includes 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.
