Are You An Independent Contractor? If So, You May Need Insurance…

There is a lot of confusion and mis-interpretation when it comes to contractors. Some people hear the word contractor and they automatically think of a building contractor who is in a construction related field such as a builder or remodeling professional.

But the word contractor has a much broader definition. There are many people who are independent contractors without even knowing it. In fact, the IRS definition of independent contractors is “anyone who offers their services to the general public.”

This fits a lot of profiles. In fact, they go on to describe professions such as doctors, lawyers, accountants, public stenographers, auctioneers and more, who are in an independent trade, as independent contractors.

This means you or someone you know may be a contractor without even recognizing the fact. And many independent contractors such as those professionals named in the above paragraph need to consider a few different insurance policies.

For starters, many independent contractors would benefit from some form of liability insurance. Obviously, doctors would benefit from malpractice insurance. Other contractors can purchase professional liability insurance or Errors and Omissions Insurance to protect themselves and their business. E&O coverage is a good place to start for the those other professions mentioned above. This type of insurance protects professionals from mistakes they might make, as well as from claims of failure to deliver services as expected.

Then there’s general liability insurance. General liability insurance protects independent contractors from accidents at their workplace or even at clients’s workplaces.

The next type of insurance policy contractors need to consider is commercial vehicle insurance if they use a vehicle for business.

Next there’s commercial property insurance if they own business property such as the building where they work or even commercial investment property.

While this list of insurance policies seems to be getting long, remember you may not need all these policies. It all depends on the specific risks and liabilities associated with your business or profession.

In order to determine what you need, it is a good idea to first define your type of business. Are you an independent contractor? Are you an employer? (If so, there are other policies you need to consider such as workers compensation insurance, but we’ll get into that in another post.)

Once you have defined your entity, you need to do a little research into what insurance you are required to have by law in your state. Then check out what type of insurance you may want to have even if not required by law.

Finally, contact an insurance agent or broker and ask about a bundle of all the insurance policies you want to buy. They can shop around for you and try to save you money by getting you multiple quotes for different companies that offer business insurance.

3 thoughts on “Are You An Independent Contractor? If So, You May Need Insurance…

  1. I am an independent contractor in the beverage business. I install & service beverage equipment such as,tea,coffee & soda. A company that wants me to sub for them requires a minimum of $ 1,000,000 general indemnity /personal injury insurance. Also worker’s comp that meet Texas’ minimum requirements. What type of monthly cost am I looking at. Thanks. 972-693-0919

    • Hi Anthony,

      General liability insurance costs vary widely from one carrier to another. I’ve heard stories of independent contractors with low volume paying as little as $500 a year, to contractors with lots of volume paying more than $3000 per month for liability insurance. You really need to shop around both online and offline. As far as workers compensation insurance, it all depends on how many employees you have on your payroll. Here’s a workers’ comp rate guide for your state that you may find helpful.

      Best of luck finding a good insurance provider at a fair price. They are out there, it just takes some research.

      Jim D.

  2. Hello I am an Independant Contractor, I drive a taxi, but the company is not required to carry insurance coverage on me and I do not own a vehicle..what type of insurance can i get or need? thx!

Leave a Reply

Your email address will not be published. Required fields are marked *

You may use these HTML tags and attributes: <a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <s> <strike> <strong>