Independent Contractor Insurance

As an independent contractor, you may be wondering what kind of insurance you need to protect yourself financially. After all, independent contractors come in all different shapes, sizes, and specialties. The answer depends entirely on the type of work you do, for example, if you do data entry from a cubicle, digital marketing services from your home office, or work on other people's property providing home maintenance and construction services.

The good news is that an independent insurance agent can help tailor the perfect coverage for you by combining specific policies into one convenient, cost-effective independent contractor insurance package. They'll get you matched to each type of coverage necessary for your line of work. But first, here's a breakdown of independent contractor liability insurance and why it's necessary.

What Kind of Insurance Do Independent Contractors Need?

Regardless of your specific niche, most independent contractors can benefit from having general liability insurance. This coverage can reimburse you for many of the costs associated with third-party claims of bodily injury or personal property damage caused by you or your business. 

A 1099 contractor has about the same risk of getting sued and held liable for injury and damage by their customers, clients, or other visitors and guests as other business owners. General liability insurance can cover the cost of lawsuits, including attorney, court, and settlement expenses. Coverage can also pay for third-party medical expenses if they get injured and pay to repair or replace damaged or destroyed property of others.

Beyond general liability insurance, independent contractors may need additional coverage to protect themselves. For example, commercial property insurance can help protect your business property from losses caused by covered perils like fire and theft. 

You may also need additional liability protection depending on the type of work you perform. If you offer advice, counsel, or other professional services to the public, you might need professional liability insurance to protect yourself against lawsuits and other possible expenses if you're accused of improper or inadequate services rendered by your customers or clients.

What Is a 1099 Employee?

Independent contractors are also referred to as 1099 employees. These individuals are self-employed and not claimed as employees by any business. Freelancers fall into the 1099 independent contractor category, as do other professionals who partner with clients and businesses to do work for them without being considered part of their staff. The "1099" part of the label refers to the 1099-MISC form independent contractors must complete to provide proof of income to the IRS when filing taxes.

Who Needs Independent Contractor Insurance?

Many types of independent contractors need liability insurance and other coverage to match their specific risks. You might need independent contractor insurance if you can be classified as any of the following:

If you work in any of these professions, consider looking into independent contractor insurance. An independent insurance agent can also help you determine which type of coverage you might need.

General Liability Insurance for Independent Contractors

Having the right independent contractor liability insurance can protect you from the cost of lawsuits, third-party injuries, and third-party property damage. In some cases, prospective clients or customers may actually request proof of general liability insurance before they agree to work with you. 

To fully protect yourself, you’ll need a few different types of coverage, including:

• General liability insurance: The foundation of all contractor insurance coverage is a general liability policy. This coverage will provide two types of protection:
  • Bodily injury liability: Provides coverage if you or someone who works for you causes injury or death to a third party during the course of work. It provides for medical care for the injured person and covers your legal defense if you are sued for damages.
  • Property damage liability: Provides coverage if you or one of your employees causes damage to property belonging to others, not including the property you’re working on. This includes the building or property you are working on or any third-party personal property. For example, if an electrician was at your house to repair a light fixture and caused a short that started a fire and burned down the house, everything would be covered except the light fixture itself.
• Completed operations coverage: Provides coverage in case a project you finished has an issue or causes damage. It can also extend to any products you sell or distribute.
• Advertising liability insurance: Covers potential costs, like lawsuits and legal fees, associated with the risk of damaging another's reputation or causing a loss through slander, libel, or false advertising claims.

The specific independent contractor liability insurance coverage you need will be unique to your business. By working with an independent insurance agent, you can eliminate any gaps in coverage that could leave you exposed to expensive legal claims.

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Professional Liability Insurance for Independent Contractors

Contractors who provide consulting and advice, like accountants, financial planners, interior designers, and landscape architects, need to be concerned about additional liability risks. If a client experiences a loss or harm after your services or recommendations, they could file a lawsuit. 

Professional liability insurance, also known as errors and omissions insurance, can reimburse you for losses related to improper or inadequate work performed by you or your business that causes harm or loss to a third party. 

Professional liability insurance can protect you against claims of:

• Professional negligence
• Failure to complete work by an agreed deadline
• Errors and omissions in your work or services
• Oversights in your work or services
• Harm or loss stemming from your improper or inadequate services
• Breach of contract

An independent insurance agent can help ensure your business gets equipped with all the professional liability insurance it needs to be protected against many types of claims.

When to Consider Professional Liability Insurance

You might still be unsure of whether you actually need professional liability insurance. Consider the following criteria to help you determine if your coverage needs to include errors and omissions insurance:

If you utilize subcontractors, it is a good idea to make certain they are insured with professional liability coverage as well, as they might not be covered by your policy. Your independent insurance agent can help you list these additional insured individuals on your policy and ensure they're protected by adequate coverage limits.

Additional Coverage Considerations for Independent Contractors

Independent contractors are typically responsible for getting their own insurance coverage since they're not employees of a business that may offer group coverage. As such, independent contractors should at least consider looking into the following types of additional coverage:

• Product liability insurance: If you sell products to the public, you could be held liable for harm caused by these products, even if you don't manufacture them yourself. This coverage can help pay for lawsuits and other associated costs due to defective products and more.
• Liquor liability insurance: Independent contractors who serve food and/or alcohol at functions need to be concerned with potential injuries and illnesses that could arise. This liability coverage helps protect you from possible lawsuits and other related expenses.
• Health insurance and disability insurance: As an independent contractor, you’re most likely not on a group plan to cover your own injuries, which can leave you exposed to a loss of income risk if you become ill, disabled, or injured. Having health insurance and disability insurance can help you pay for medical expenses and even cover lost wages if you become disabled. 
• Cyber liability insurance: If you store private or sensitive information for your work, such as customer or client credit card data, you could be at risk for losses in case of a data breach or cyber-attack. This coverage can help cover the cost of lawsuits and other expenses if private data gets sold or distributed.

As an independent contractor insurance policyholder, take some time to review your coverage to be certain you have every type of protection you need. If you're lacking coverage in any area, an independent insurance agent can help you find the right policy to bridge the gap.

Business Owners Policy Insurance for Independent Contractors

Contractor general liability insurance can often be bundled with a few other coverages to create a business owners policy (BOP). A BOP is a convenient package of critical business insurance that covers many of the risks small business owners face. It also typically results in a discount on the cost of your insurance. 

This coverage will likely make sense for you if you have employees. A small business is often defined as a business that has up to 100 employees and generates about $5 million or less in annual revenue. In addition to general liability insurance, the coverages that can usually be bundled with a BOP include:

• Commercial property insurance: This insurance covers your owned or rented property if it’s damaged, stolen, or destroyed by a covered cause. This includes office buildings, storage facilities, warehouses, workshops, or garages and equipment, tools, and inventory.
• Commercial auto insurance: Insures your cars, trucks, vans, specialized trucks, or any vehicles used for business purposes against losses related to lawsuits, accidents, theft, vandalism, and more.
• Business interruption insurance: This protects you from a loss of income if your business is interrupted due to a covered loss by continuing to pay operating expenses during the closure.

Your independent insurance agent can help you build a complete business owners policy for your small business. They can help you find the best insurance company for your needs and choose a policy with the right premium rate and deductible for your budget.

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Our independent agents shop around to find you the best coverage.

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Do Independent Contractors Need Workers Compensation?

As an independent contractor, you may also need workers compensation insurance. Workers comp regulations are mandated by each state and depend on your business's niche and number of employees. If you have employees, your state will most likely require you to carry this coverage. In turn for offering this coverage, your employees and their families cannot sue you or your business for work-related mishaps that result in injury, illness, or death.

This policy protects workers from costs related to job-related illness, injury, or death. It can also reimburse workers for lost wages if they cannot return to work due to their injuries. Independent contractors who do not have any employees are most likely not required to have workers comp. Check your state's specific regulations to be certain.

The Best Insurance Companies for Independent Contractors

Many of the best small business insurance companies offer the types of coverage needed by most independent contractors, including general liability insurance. However, we've included just a few of our top recommendations for the best independent contractor insurance companies for your convenience.

Top Independent Contractor Insurance Company	Overall Carrier Star Rating
Nationwide	5 Stars
Travelers	5 Stars
Progressive	5 Stars
The Hartford	5 Stars
USAA	4.5 Stars
Hiscox	4 Stars
Next Insurance	4 Stars
Thimble	4 Stars

The Benefits of Working with an Independent Insurance Agent

Independent insurance agents have access to multiple independent contractor insurance companies, so they're free to shop and compare quotes and policy options for you. They'll get you matched to a policy that ultimately delivers the best blend of coverage and cost. And down the road, your agent will be there to help you file claims and update your coverage as your business's needs evolve.