Often, independent contractors and freelancers opt not to get liability insurance. They either feel they don’t have enough business to have any exposure to or are not generating enough revenues to be considered the target of a claim or lawsuit. The truth is that independent contractors risk expensive claims for accidents. Having general liability insurance is an inexpensive way to protect themselves and their business from high out-of-pocket expenses.
Why Do Independent Contractors Need Liability Insurance?
Every person in business, whether running a large operation or existing as a one-person show, needs liability insurance. While occurrences for something like burglary are more frequent, claims for liability are more costly, with the Centers for Disease Control and Prevention claiming that slip-and-fall accidents can exceed $30,000. That doesn’t include legal costs, which can be thousands more. This is money that most independent contractors don’t have on hand to payout. Without insurance, lawsuits could eat up assets and even levy bank accounts to get the money.
Types of Liability Insurance for Independent Contractors
There is more than one type of liability insurance available to independent contractors. The two most common liability insurance products are:
- General liability insurance: Covers third-party claims of injury and property damage. This is often referred to as slip-and-fall coverage but extends to other types of incidents, such as accidentally damaging someone’s property.
- Professional liability insurance: Covers claims that state that the independent contractor did not provide professional services or advice, such as a fitness trainer teaching a client the wrong form that leads to a back injury.
Depending on what type of business they have, an independent contractor may also seek product liability insurance to pay claims arising from injuries or illnesses resulting from using products they make or sell. For some, this may be included in a business owner’s policy (BOP).
If the independent contractor keeps client property in his possession, he may also want to get garage keepers liability coverage. This would cover an independent computer repair technician who accidentally breaks his client’s laptop by dropping it.
Contractors Insurance vs Independent Contractors Insurance
When purchasing insurance, it can be confusing to understand the difference between contractors’ insurance and independent contractors’ insurance. The confusion could be one reason many independent contractors don’t think that they need insurance.
Contractors insurance refers to the series of policies designed to protect those in the construction industry, such as general contractors, electricians, and carpenters. Many of the same types of policies apply to independent contractors, but you’d want to make sure you are getting a policy underwritten for your profession. An independent contractor who works as a bookkeeper has different risks than a general contractor building homes.
Benefits of Liability Insurance for Independent Contractors
Independent contractors that have general liability insurance reap more than just one reward for having the policy. First and foremost, you get covered for claims. You won’t have to pay for the cost of claims out of pocket, which can save both business and personal assets depending on how your company is structured.
However, as an ancillary benefit, having general liability insurance makes you look more professional to prospects. People want to work with pros, and thus it can help increase business prospects. Finally, independent contractors might not be eligible for government or large company contracts. Large entities often require anyone they contract with to have at least $1 million in liability coverage. Without it, you won’t even be considered.
How Independent Contractors Get Liability Insurance
The easiest way to get liability insurance is to purchase a policy. It is also possible to be added as an additional insured to another policy. For example, this might happen if a coder works for an information technology (IT) company on a major project, and the coder wants to be protected by the IT company’s insurance. This way of getting coverage only protects you for the work you do for that one client.
It’s a good time to get a general liability policy if you conduct work outside of your home or office. If you have clients who come to your home or office, you’ll want to get protected for liabilities, such as slip-and-fall accidents. As your business grows and you take on bigger clients, you’ll likely need to get a policy as part of the bidding process to land major contracts.
When you’re ready to get your own general liability insurance policy, we suggest calling The Hartford. Its small business insurance experts can help you identify the real risks that your business has and insure you for a great rate. It takes just a few minutes to get a quote.
How Much Does Liability Insurance Cost for Independent Contractors?
Getting a general liability policy doesn’t need to break the bank. You can get a general liability policy for as little as $481 per year. That breaks down to about $40 per month. Depending on your industry, professional liability insurance policies range from $50 to $138 or more per month.
The factors that affect your price include your industry, revenue, coverage amount, and claims history. Providing as many details as possible about your business practices and location will help the insurance carrier appropriately underwrite the policy. Keeping claims down is the best way to mitigate growing insurance costs.
Independent contractors are at risk of having their hard-earned careers bankrupted with even a small claim that could be tens of thousands of dollars. Getting liability insurance is the most cost-effective way to protect yourself from this. Plus, having insurance makes you more attractive to bigger clients and provides an overall sense of professionalism on your part which can earn you more money.