General Liability Insurance for Independent Contractors
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General Liability Insurance for Independent Contractors

More often than not, independent contractors need their own General Liability Insurance because if they aren't insured, employers can end up shouldering the liability – and the costs – when something goes wrong.

It might help to think of your work relationships as a potluck. To join the fun, everyone needs to bring something to the party. Independent contractors bring their time and talents, but let's look at why you might also ask them to bring their liability insurance.  

Independent Contractor Insurance: Why It's Essential

Independent contractor insurance is essential for three reasons:

  1. To ensure that contractors can pay lawyers' fees and damages if they're sued over their work.
  2. To ensure that people employing contractors don't end up paying if the contractor is sued.
  3. To meet statutory requirements in states and industries where everyone needs to be covered by insurance (for example, in construction).

Let's look at those in detail.

First, 1099 contractors may not consider themselves "real" businesses, but contractors and freelancers have the same legal obligations and liability exposures as larger firms. That means they can be sued by clients and customers. General Liability Insurance can provide funds to pay lawyers, judgments, and settlements if that happens.

Second, if a 1099 contractor your business hires doesn't have liability insurance, you as the employer could be held responsible for their wrongdoing or accidents they cause. The article “Does Your General Liability Cover Your Contractors?” provides a good example of how a contractor’s mistakes can lead to lawsuits against your business.

Finally, work that is inherently dangerous, like construction, may result in specific legal requirements for employer-contractor relationships. Most times, it’s better for both parties to have their own General Liability Insurance just in case. But if you have any questions, you should contact an insurance agent or lawyer.

Do Independent Contractors Really Get Sued?

A lot of independent contractors scoff at the idea of being sued. They know and trust their clients and deliver high-quality work – why would anyone sue?

But lawsuits can take on a life of their own. When a lawyer is bringing a lawsuit, their job is to recover as much as possible for their client. To do that, they might sue everyone even vaguely involved with an incident – including contractors whose work was only indirectly related.

Without 1099 liability insurance, you'd have to pay to defend yourself out of pocket, plus pay any damages you're found liable for. With a General Liability Insurance policy, though, those expenses are covered.  

Different industries face different risks. A contractor hired to design a webpage faces significantly different risks than one hired to remodel a bathroom. The web designer is more likely to run into copyright infringement issues, for example, and the remodeler faces a greater risk of the homeowner accidentally being injured. Good thing contractor General Liability Insurance can address both instances.

How to Get General Liability Insurance for Independent Contractors

You have two options to make sure a contractor has liability coverage:

  1. Add the contractor to your General Liability policy as an “additional insured.” Essentially, that means they are covered by your insurance for the duration of the job or longer. Your choice. If you work with multiple contractors, you can usually add each of them to your General Liability Insurance.
  2. Tell your contractors to get their own General Liability Insurance. Lots of small-business owners do this by adding the requirement to their contracts. You can check the 1099 worker's Certificate of Liability Insurance to make sure they're covered.

Adding contractors as additional insureds is often the more expensive option. It’s basically like hosting a party and shouldering the entire cost on your own. 

On the other hand, it could be the right choice for you, depending on your situation and who you’re working with. For example, if you're working with Steve, the guy who always says he’s bringing the potato salad and never does, you may be better off taking on the responsibility yourself just to be sure someone does.

The second option – requiring 1099 workers to have General Liability Insurance before you hire them – is usually the more cost-effective safeguard for your business. Basically, it’s like telling your party guests to sign a contract that legally obligates them to bring their own meat for the cookout. Everyone is responsible for themselves, and that saves you money.

Both options give you assurance that your business and the contractor have protection if either is faced with a third-party lawsuit over bodily injury or property damage.

Other Types of Insurance for Independent Contractors

In addition to General Liability Insurance, your contractors may need…

If you're a small-business owner, a contractor, or both, fill out an application with Insureon or contact one of our agents to learn more about protecting your business.

General Liability Insurance: Further Reading

General Liability Insurance in the Insureon Blog