If you run a business as an independent contractor, you need to protect your business, yourself, your employees, and your customers. That’s why having a business insurance policy (or three) is a necessity: it ensures (pun intended) that, should your business encounter any issues, you don’t go into the hole to cover them financially.
Here, we’ll look at different types of commercial insurance you should consider, as well as address who needs business insurance coverage as a contractor.
What Kind of Insurance Do I Need as an Independent Contractor?
There are actually several types of commercial insurance policies you should consider, and some you may be required to have by local government authorities.
General Liability Insurance
Every small business should have general liability coverage, which covers property damage or bodily injury caused by your business. It also protects you in case of a lawsuit. For example, if you are sued by a client because they fell on a staircase you constructed, a general liability policy may cover those legal expenses incurred in the lawsuit.
General liability may cover legal fees, as well as costs for property damage claims on a job site, and medical expenses.
Commercial Property Insurance
This type of insurance policy covers property damage or theft, whether that’s a building, computers, or the equipment you use to do your job, such as tools if you’re a plumber.
You likely have a vehicle you use to go to jobs and run errands for your business. Did you know that your personal auto policy may not cover accidents during work hours? That’s why you need a commercial auto policy for you and your employees driving company vehicles.
Business Owners Policy
A business owners policy, also known as BOP, combines general liability insurance coverage and property damage coverage, often for a lower price than you’d pay for both of these policies individually.
Workers’ Compensation Insurance
If you have employees, you may be required by your state to carry workers’ comp coverage. This covers medical bills and expenses for your employees, should they become injured on the job.
Why Do Independent Contractors Need Insurance?
Working as a contractor, you are not an employee of someone you work for, and therefore, you carry more risk for your business. Let’s say you are a builder and you complete building a new home, and then the owner of the home sues you because there’s a crack in the foundation. Without insurance, you could rack up tens of thousands of dollars (or more) in legal defense fees that you can’t afford. With liability coverage, however, those fees may be taken care of, providing you peace of mind and conserving your cash.
If you work as a subcontractor with another contractor on a project, you may be required to provide a certificate of insurance that proves you have coverage. This minimizes the risk that contractor takes on by bringing you onto the project.
Can an Independent Contractor Be Held Liable for Damages?
While, yes, you can be held liable for damages, whether you have to pay for them out of pocket or not depends on whether you have general liability coverage or not. Without insurance, you are fully responsible for any legal fees or other expenses incurred in a lawsuit, but with insurance, you may only be responsible for your deductible.
How Much Does Liability Insurance Cost for an Independent Contractor?
Professional liability insurance pricing depends on a variety of factors, including the type of work you do, the insurance company you choose, how many additional insured employees you have for workers’ comp, the type of insurance coverage options you choose, and the deductible you’re comfortable with. The lower the deductible, the more you will pay in premium, and the higher the deductible, the lower the premium, so choose a policy that balances the two.
In general, you can expect a general liability insurance policy to cost between $400 and 600 a year.
Who Needs Independent Contractor Liability Insurance?
Any small business owners who offer professional services need some form of commercial general liability insurance policy. This includes electricians, plumbers, builders, remodeling specialists, carpenters, and more.
Also, if you have employees, you need commercial auto insurance and workers’ compensation coverage. Some clients and contractors, if you’re a subcontractor, may require a certificate of insurance, so check first to see what the requirements are.
How to Get Independent Contractor Liability Insurance
Contracting businesses are responsible for finding their own insurance provider and coverage, so shop smartly. Start by knowing what types of policies you need. Some insurers may provide discounts if you purchase more than one policy from them.
Get several insurance quotes, and research the reputation of each insurance company to find one with stellar customer service and prompt response times.
Other Types of Insurance for Independent Contractors
In addition to independent contractor insurance, consider what other insurance needs you may have. If you use a computer to do business, consider what you’d do if you had a data breach and your customers’ financial information was compromised. Cyber insurance can protect against that.
Also, as a self-employed business owner, you will have to purchase your own insurance for health and medical coverage. If you have employees, you may be required to (or simply want to) provide health insurance for them as well.
Small business insurance, no matter what type of policy, can provide peace of mind, knowing that, should your building be damaged by weather, you’re covered. If you are sued by a client, you’re covered. If an employee gets hurt on the job, you’re covered. If you get into an accident in your company car…well, you get the picture. Investing in business insurance for your independent contracting company is an investment in lowering your risk of the unexpected.