Independent Contractor Insurance Is Critical: Here Are Your Essentials

by
Jacqueline Rupp
Updated 
February 1, 2023
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Reviewed by
Independent Contractor Insurance Is Critical: Here Are Your Essentials
by
Jacqueline Rupp
Updated 
February 1, 2023
Icon check
Reviewed by

Do you need independent contractor insurance? As a 1099 freelancer, self-employed, or business owner, the answer is most likely yes. Because independent contractors work for themselves and are not employees, they need to cover situations an employer typically does. This includes things you're probably already aware of, like social security tax and health insurance.

But there's more to consider beyond just those essentials to keep your business safe and thriving.  Overlooking some of these critical types of insurance could be financially devastating to your business. But don’t stress! With a ton of insurance companies or coverages out there, getting business insurance and being protected is more affordable than ever.

Contents

Do independent contractors need insurance?

Without the right business insurance coverages, an independent contractor can be sued for errors, mistakes, accidents, and so on; these claims can be expensive. Without insurance, the independent contractor will have to pay any lawsuit costs out of pocket. In some cases, one lawsuit could be expensive enough to put an independent contractor out of business.

Types of insurance for independent contractors

If you're an independent contractor, there are several different types of insurance that you should consider to protect yourself and your business. Coverage options all depend on the type of work that you do and what your business needs. In order to show a client that you are protected, request a certificate of insurance from your provider.

General liability insurance

No matter the type of business you run, experts recommend carrying general liability insurance. This covers many business risks like injury or property damage that may occur at a work location or job site. Some examples of independent contractors who most definitely need general liability coverage include:

There are two ways to get general liability insurance: from your client or from an insurance provider. Generally, most independent contractors opt for liability insurance from an insurance provider. Advertising that you're fully insured and can show proof of coverage is good for business. If a client has general liability insurance, they can add an independent contractor to their policy as an additional insured. But this option probably only works for long-term clients since it places the expense on clients.

If you’re interested in getting a little extra coverage for a better deal, consider a contractor package policy, or business owner’s policy (BOP).

Insurance cost

Approximately $30 per month.

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Commercial auto insurance

Commercial auto insurance is critical if you own, lease, or rent cars or trucks as part of your business. If you have employees or subcontractors that drive either their own vehicles for work or company vehicles, this insurance is essential.

Commercial insurance helps cover the costs of an auto accident if you or an employee is at fault. If one of your vehicles strikes a pedestrian or if your vehicle damages property, commercial auto insurance can help. Commercial auto insurance will cover vehicle damages, business property damages, and medical expenses.

Insurance cost

Approximately $750 to $1,200 per vehicle per year

Worker’s compensation insurance

Workplace accidents are inevitable, no matter how safely you run your business. One of your employees may become sick or bodily injury on the job. Worker’s compensation insurance, also known as workman’s comp or workers’ comp, protects your business by providing benefits to your employee.

This covers medical care, lost wages, disability insurance, or funeral costs. Worker’s compensation insurance also covers your business in the event that the sick or injured worker or their family sues your business. One more important part of this insurance, you can use it yourself. Say you can't work due to an illness or injury, it can help you survive without your usual income.

Insurance cost

A small business owner with just a few employees can expect to pay approximately $2,000 to $3,000 per year

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Independent contractor health insurance

The Individual Health Insurance Marketplace is worth exploring if you're self-employed with no employees. There are a ton of great insurance coverages. Popularly known as "Obamacare," any self-employed worker, such as a freelancer, consultant, or independent contractor can enroll in this. But that is not the only option. There are many private health insurance options.

It's a good idea to contact a health insurance broker who can look into your specific needs and business structure for the best fit. You may also be eligible for tax deductions on your family's medical and dental insurance premiums.

Insurance cost

Begins at approximately $400 per month for a family of four but can cost upwards of $1000+ per month based on deductibles and other variables.

Commercial property insurance

If you are running your business out of your home, then you may want to consider purchasing commercial property insurance.

This provides more coverage than your average homeowner's policy. It protects not only the structure but also the assets contained within, such as equipment, tools, inventory, and furniture. These assets are covered by commercial property insurance in the event of fire, flood, lightning strike, or theft.  The insurance can also cover lost income if you can’t operate due to a covered loss.

Insurance cost

An average small business would pay approximately $500 to $3,000 per year

Business income insurance

Business income insurance exists solely to replace lost income due to things like fire damage, wind damage, or theft. If your business is unable to operate due to damages, this insurance helps cover your costs until you're up and running again.

This coverage ensures that you can continue to make payroll and pay other expenses while your business recovers. You can modify your business income insurance policy by adding endorsements, which will protect you if your business depends on a physical location or specific equipment. For instance, an endorsement is needed to cover servers, cloud storage, and digital property.

Insurance cost

Between $40 and $130 a month

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Errors and omissions insurance

Mistakes happen. Unfortunately, a client can sue you if they think a mistake you made caused them to lose money. Errors and omissions insurance (E&O), also known as professional liability insurance protects you and your business in the event that you make a mistake while providing professional services.

This type of insurance helps cover you against claims of negligence, misrepresentation, or inaccurate advice. Keep in mind that a client may sue you if they think you did something wrong, even if you didn’t. E&O insurance covers your legal costs so that you don’t have to pay for them out of pocket.

Insurance cost

Approximately $500 to $1,000 per employee per year

Jacqueline Rupp

Jacqueline Rupp

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Jackie helps businesses build better brands and create engaging content. Beyond marketing, she also blogs about embracing quirks and overcoming insecurities. When not in front of a screen, she's generally playing with foster kittens, dabbling in handmade crafts, or eating pancakes. 

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