Do independent contractors need business insurance?
Business insurance is always a good idea for serious players, but even those just getting started might need it to get bigger jobs, sign leases, and even purchase certain types of equipment.
Insuring your business is a huge part of your safety net. It’s better to invest some money into a solid insurance plan than to be put out of business over something unexpected. You need to protect what’s yours if you’re going out on your own.
As an independent contractor, you’re a free agent.
That means when you’re hired to do a particular job, you aren’t bound by the same rules as an employee (which is pretty awesome). But all great things (like freedom) come with downfalls (like not getting the same benefits that a full-time employee has).
As an independent contractor, you’ve got to put together your own safety net, which means figuring it all out on your own. Well, not all on your own. Because we’re here to help.
What kind of business insurance should I get?
Many factors figure into this: What you do, what you want to protect, how many employees you have.
Workers’ compensation insurance is a good place for independent contractors to start because many are required to cover themselves in order to get hired for a job. It’s especially important for construction contractors.
Professional Liability Insurance
Professional liability (aka E&O, or errors and omissions) is important to have if you offer professional services or expertise to clients for a living. It will help protect you should something happen that causes a client to file a lawsuit.
Even if you’re always on top of things, you can still be held liable if your client thinks something is your fault and you would have to defend yourself, which could add up quickly.
Professional liability covers the costs of getting sued by a client, including:
- Paying your attorney
- Judgements and settlements
- Court costs
If you are working with smaller clients who most likely won’t take you to court due to time or money, this coverage might not be your top priority. But if you’re working in certain industries, like tech, design, or business consulting, you should consider this coverage no matter how big or small your clients are.
If you’re interested in specifics, contact one of our agents to find out what you need, based on your business.
General Liability Insurance
General liability insurance, or GL for short, protects you from many common things that can go wrong as a business owner, such as third-party lawsuits pertaining to bodily injury, medical costs, and damage to someone else’s property.
If someone gets hurt or property gets damaged because of you (or one of your employees or subcontractors), this policy helps cover the cost. Not only that, it’ll help pay for all of the wonderful things that come with a third-party lawsuit, like court fees, judgements and settlements, and paying for a lawyer.
To sum it up, this coverage is a must for most independent contractors… Trust us.
General liability insurance covers the following things that may occur as a result of your operations, your employees, your premises, or completed operations.
- Bodily injury “slips and falls” (lawsuits and medical costs)
- Damage to someone else’s property
- Personal and advertising injury
This coverage becomes more important the more equipment you have and the more you interact with the public.
Business Owner’s Policy
Interested in a little extra cushion? Well then, you may be interested in a package, like a business owner’s policy (BOP), which combines general liability and property insurance. Business owner’s insurance is commonly known as a “catchall” policy.
A business property insurance policy would come in handy if:
- You’re a landscaper and your equipment is stolen or damaged.
- You do all of your work on a laptop and it gets damaged in a fire.
- You own or rent a commercial office space or building.
Business Auto Insurance
If you own vehicles through your business, you’ll need this, if you don’t already have it. And even if you drive your personal vehicle on behalf of your business, you’ll want to have this.
We say this because your personal auto insurance probably doesn’t include enough coverage for business-related accidents.
Keep in mind that a business-related accident could mean something as simple as getting in a fender-bender on the way to a meeting with a client.
Learn more about business auto insurance.
Cyber Liability Insurance
If you handle sensitive customer information (even taking credit card payments) you might need to look into cyber liability insurance.
A lot of people think that because they’re independent contractors, hackers wouldn’t bother messing with them. But you could actually be a bigger target because potential hackers are probably betting that you don’t have the same sophisticated security as larger companies.
Many companies that hire independent contractors will expect them to have their own workers’ compensation coverage, especially in more dangerous industries.
Employers don’t want the financial responsibility of a contractor working for them who is not a full-time employee. They want you to be responsible for yourself, especially if you get hurt or sick.
Will business insurance cost me an arm and a leg?
This is a common misconception. You can build a plan that fits your needs and provides coverage for only the risks you face and nothing more. The lower your risk of liability claims, the less the policy will cost you. So you’ll only pay for what you need, fair and square.
What else should independent contractors should consider?
You should take a look at life insurance, car insurance, homeowners/renters insurance, and health insurance.
Need advice? We can help.