Do independent contractors need liability insurance?
Yes. Both employers and independent contractors should have their own general liability coverage. Think of contracting as a team effort: Everyone needs to pitch in for the project. Independent contractors contribute to a project with their skills and their time.
And because each party is technically its own small business entity, everyone should carry a liability insurance policy.
Independent contractor insurance requirements
Independent contractors should have the right insurance so they will be able to cover any damages or court costs in the event that they get sued.
- You may be required to get a general liability insurance policy in order to sign a building lease.
- There may be employer–contractor legal requirements in order to perform services.
- Employers may require you to have liability insurance so they’re protected if they get sued over your operations or work.
Different industries face different liability risks.
A designer hired to remodel a kitchen might accidentally damage someone’s home, while a graphic designer might get sued for copyright infringement. General liability insurance can cover both instances.
General liability insurance is a good place to start.
It’s great for independent contractors, because it’s a basic insurance policy that covers many of the random things that could go wrong when you contract work. Common liabilities include slip-and-fall accidents, property damage, bodily injuries, advertising injuries, copyright infringement, and repetitional damages.
Professional liability is also worth considering.
Professional liability insurance (AKA errors and omissions insurance) is important if you offer professional advice or expertise for a living. It covers negligent services, professional errors, and failure to deliver promised services that lead to another client’s loss or injury.
Other insurance policies that may be required:
- Business property insurance if you have business property you need to protect.
- Inland marine insurance if you take that property away from your business premises, like tools or equipment.
- Business auto insurance to protect the vehicles your business owns.
- Hired & non-owned insurance to protect any vehicles driven on behalf of your business but not owned by your business. This also applies to vehicles hired or borrowed.
- Cyber liability insurance if you handle sensitive customer data.
- Workers’ compensation if you need to cover yourself or your employees from getting hurt or sick on the job.
Top reasons you should have your own business liability insurance
- You’re more likely to get hired.
- It’s easier to win bigger jobs.
- You can be sure you’re protected for damages resulting from your work and/or operations.
- Having coverage means you are protected by the insurance company and their team of professionals.
- There may be employer-contractor legal requirements depending on the state and who you are doing the work for.
How much does liability insurance cost for independent contractors?
Liability insurance rates vary depending on what you do, the size of your business, and where you work. Not every independent contractor’s risks are the same, and liability insurance prices can fluctuate depending on the level of risk you face. A smaller operation might expect to pay somewhere around $400 to $600 a year.
Check out our detailed breakdown of independent contractor insurance costs to learn more.
Do my contractors need insurance?
Yes, independent contractors need to have insurance. If you hire an independent contractor and they don’t have liability insurance, you can be held responsible for accidents or mistakes they’ve made while working for you.
Does my liability policy cover my contractors?
Maybe. If you have your own general liability insurance policy, it might cover the people doing work for you, but you will be charged an additional premium (meaning you’ll get charged a higher price for your insurance).
If you’re unsure or have questions, it’s best to ask your insurance agent or a lawyer.
The relationship between your contractors and your liability policy
Say you’re a graphic designer who was hired to build a website. Your client needs some SEO work done, so you contract that part of the project to a writer.
After the project is done, a different company sues your client for plagiarism. In turn, your client files a lawsuit on both you and your contractor.
That doesn’t seem fair. Isn’t the contractor you hired responsible for their portion of the work? The truth is, you both might be in trouble. That’s why it’s a good idea to make sure both you and your contractors have adequate insurance protection.
How to handle liability insurance for contractors:
1. Make sure your contractors have their own general liability insurance and/or professional liability insurance policy. Ask for a Certificate of Liability Insurance for proof.
2. Ask your subcontractor to list you as an “additional insured” on their liability policy. That way, if there’s a claim against the subcontractor’s policy for work he or she did, you will be afforded some coverage under their policy, and their policy would respond first in the event of a claim.
3. Require them to have liability insurance coverage in your contract. This legally obligates them to be responsible for their own insurance.
Need liability insurance for yourself or your contractors?
Get a quote with us, and we’ll help you out at no extra cost.