General liability insurance covers common business risks like customer injury, customer property damage, and advertising injury. It protects your small business from the high costs of lawsuits and helps you qualify for leases and contracts.
Like any other small business owner, independent contractors can be sued and held liable for damages. General liability insurance is essential for independent contractors because:
It protects you and your business. Independent contractors have the same legal obligations and liability exposures as larger firms. They can be sued for damaging client property, causing bodily harm, or advertising injury. General liability insurance helps cover legal fees and damages resulting from a lawsuit.
Your clients want you to have it. Your clients may require you to have general liability insurance before they sign a contract with you. Without this insurance, they could be held responsible for alleged wrongdoing or accidents caused by you or your work.
It may be required by law. State regulations sometimes require independent contractors in certain industries, such as construction, to carry general liability coverage. Most often, it’s best for both you and your client to obtain separate general liability insurance policies.
Independent contractors can be sued and held liable for damages, just like other small business owners. Without insurance, you would have to pay out of pocket to defend yourself in court and also pay for damages. With a general liability insurance policy, those expenses are covered.
Different industries bring different risks. A 1099 worker hired for a photo shoot faces significantly different risks than one hired to remodel a bathroom. For example, the photographer could be accused of copyright infringement, while the remodeler faces the risk of potential injury to the homeowner.
General liability insurance addresses both issues.
There are two ways for an independent contractor to get general liability coverage:
You can get your own general liability policy. You can purchase general liability insurance from an insurance provider. To show a client that you are covered, request a certificate of insurance from your provider. This option is usually more cost-effective for your clients.
Your clients can add you to their general liability policy as an additional insured. This means you are covered by their insurance for the duration of the job or longer. A business can add multiple contractors to its general liability policy. It’s typically more expensive for clients to include you in their policy as an additional insured. However, they may decide to add you, depending on the situation.
Both options provide protection if either you or your client is faced with a lawsuit over third-party bodily injury or property damage.
An additional insured is anyone besides a policyholder who is covered by an insurance policy. An additional insured has less protection than the policyholder, but still gains crucial coverage, such as:
Defense coverage. If a third party sues the additional insured over work done for the business, the business owner’s policy can address the claim. The additional insured can receive coverage for lawyers’ fees, court costs, and settlements or judgments.
Coverage for certain third-party lawsuits. An additional insured may be covered when sued over bodily injury, property damage, and advertising injury.
Business owners can add an additional insured to an insurance policy; independent contractors can also add business owners to their policy. So is the business owner or the subcontractor responsible for adding the additional insured? It depends largely on the scenario, and practices vary by industry.
Independent contractors typically have insurance obligations in their work contract that they have to fulfill. These contract requirements will often state whether the company needs to be added as an additional insured.
Independent contractor insurance varies significantly across industries. Ask your Insureon agent about the cost and benefits of getting your own insurance versus being added to your client’s policy.
In addition to general liability insurance, independent contractors may need:
Every state requires this coverage for vehicles that are registered to a business, or the ability to compensate someone in case of an auto accident. In the event of an accident, an independent contractor's commercial auto policy would cover the legal bills, medical expenses, and property damage.
For the self-employed and independent contractors, your personal auto insurance might not cover you when you drive your own vehicle for business use. If you drive your personal vehicle for work, you should consider hired and non-owned auto insurance (HNOA) to make sure you're protected.
Commercial property insurance offers financial protection for your workspace and its contents, and is often required by landlords to sign a lease. If you own or rent a workspace, or if you have expensive equipment, inventory, and other business assets, commercial property insurance would help pay for the repair or replacement if your business property is stolen, damaged, or destroyed.
If you intend to buy both general liability and commercial property coverage, you can reduce your insurance costs by bundling them into a business owner’s policy (BOP). It combines both coverages under one policy, and usually has lower insurance premiums than buying each policy separately from the insurance company.
Errors and omissions insurance, also known as E&O or professional liability insurance, can offset the cost of a lawsuit if a dissatisfied client sues you over your work. Those who offer professional advice and services buy this coverage in case a client accuses them of making a mistake, missing a deadline, or failing to deliver on a contract.
Workers' compensation covers medical costs and lost wages from work-related injuries and illnesses. It’s required in most states for businesses that have employees. Some independent contractors are required to have this coverage to work in riskier professions, such as roofing and building trades.
People who work for themselves and don’t have any employees generally aren’t required to have workers’ comp insurance, but it's still a good idea to carry coverage. Health insurance can deny claims for work-related injuries, which means you could end up facing medical bills and lost income while unable to earn a living.