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Contract work has many advantages, but it also comes with a few risks. One of the biggest dangers is that you can be sued.
Liability claims are expensive and a big one can crush a small business that doesn’t have insurance as a safety net. If you don’t have general liability insurance, you’ll need to pay for pricey claims against your independent contractor business with your own money.
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What Is Independent Contractor Liability Insurance?
Independent contractor liability insurance is a type of general liability insurance for those who work as freelancers, gig workers, carpenters, painters, plumbers and other types of professions.
General liability insurance is a type of small business insurance that pays for claims of accidental injuries and property damage to others. It also pays for other types of problems, such as advertising injury, copyright infringement and reputational harm.
Do All Independent Contractors Need Liability Insurance?
Not all independent contractors are required to have general liability insurance, but some states require independent contractors in specific industries like construction to have it. Your clients may also require that you have general liability insurance before they’ll do business with you.
Even if your state or client doesn’t require you to have general liability insurance, it’s a good idea to buy it. Without general liability insurance, you would have to pay for claims of accidental injuries, property damage and other types of claims (like slander and libel) out of pocket.
What Types of Independent Contractors Need Business Liability Insurance?
Types of independent contractors who would benefit from general liability insurance include:
- Carpenters
- Electricians
- Freelance photographers
- Freelance writers and editors
- Graphic designers
- House and carpet cleaners
- Independent business consultants
- Independent construction contractors
- Independent hair stylists and salon professionals
- Independent marketing consultants
- Independent public relations consultants
- Painters
- Plumbers
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General Liability Insurance for Independent Construction Contractors
Most independent contractors in the construction industry need general liability insurance. Without it, they won’t be able to get construction jobs. Many clients require construction contractors to have general liability insurance before agreeing to do business.
Your state may require it as well. State regulators sometimes require independent construction contractors to carry general liability insurance.
Construction workers visit job sites and interact with clients in person, so business liability insurance is a good fit for independent construction workers. You want your business covered in those situations.
What Does Independent Contractor Insurance Cover?
General liability insurance covers:
- Property damage and injuries that your small business causes.
- Reputational harm due to slander or libel.
- Advertising injury, including copyright infringement.
What Is Not Covered by General Liability for Independent Contractors?
General liability doesn’t cover many aspects of running a business, including:
- Company vehicles
- Professional mistakes
- Damage to property and equipment
- Theft of property and equipment
- Employee injuries and illnesses
Independent contractors can buy other types of insurance coverage to deal with those issues.
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Other Types of Insurance for Independent Contractors
Independent contractors may want to consider other business insurance types in addition to general liability insurance
| Type of coverage | What it covers |
|---|---|
| Commercial auto insurance | Vehicles used for business purposes, including company cars and commercial trucks and vans. A personal auto insurance policy doesn’t cover driving for business purposes. |
| Commercial property insurance | Pays to repair or replace your business property if it’s stolen, lost or damaged by problems covered by your policy (like a fire). This coverage is also called business property insurance. |
| Errors and omissions insurance | Provides liability coverage that helps if someone claims your business made a mistake, including incorrect or late services. This coverage is also called professional liability insurance. |
| Business interruption insurance | Replaces lost income if your company needs to temporarily close due to a problem covered by the policy. It’s also called business income insurance. |
| Workers compensation insurance | Pays for medical care, lost wages and rehabilitation costs for employees who get hurt or sick on the job. This coverage may also compensate a family following a work-related death. |
| Cyber liability insurance | Covers your business for the cost of cyber threats or breaches involving computer systems and data. Independent contractors who store data such as client information and accept credit cards may want to get cyber liability insurance in case of data breaches. |
One way to obtain some of these types of coverage is to purchase a business owners policy, commonly known as a BOP. This type of policy bundles general liability insurance, commercial property insurance and business interruption insurance. You can typically add other types of coverage to your BOP, such as commercial auto insurance and workers compensation insurance.
How Much Does Independent Contractor Liability Insurance Cost?
General liability insurance costs an average of $42 a month, according to Insureon. That could be well worth the cost if you’re sued for a problem like an accidental injury to someone else or reputational harm. The average cost of a slip and fall accident is $20,000 and the average cost of a reputational harm lawsuit is $50,000, according to The Hartford.
The cost of general liability insurance for an independent contractor depends on several factors, including:
- The business’s risk
- Insurance coverage amount
- Deductible amount
- Your business’s’ location
- The length of time you’ve been in business
What’s a General Liability Insurance Certificate?
Once you have coverage, you can request a general liability insurance certificate from your insurance company. This is an official document that lists all the coverage types and limits on an insurance policy. Your insurer should provide it to you at no additional cost.
A general liability insurance certificate includes:
- Insurance company name
- Your policy number
- Policy effective date
- Coverage limits
- Deductibles
Your client may request a general liability insurance certificate when liability or large losses are a concern on a job. Once you have the certificate of insurance, you can share it with your client and you’ll be ready to get to work.
Alternative to General Liability Insurance
An alternative to buying general liability insurance is for a client to add you to their own business liability policy as an “additional insured.”
An additional insured is anyone in addition to the policyholder who is covered by an insurance policy. Being an additional insured means you’ll be covered by the client’s insurance for the duration of the job.
A client could choose to add multiple independent contractors to a general liability policy but this would be costly. It’s more cost-effective for the client for the independent contractor to have their own general liability insurance policy.
Having your own business liability insurance policy as an independent contractor allows you to take on jobs from a wide variety of clients.
Which Companies Offer Insurance for Independent Contractors?
You can buy general liability insurance for independent contractors from any insurance company that sells business insurance. Forbes Advisor evaluated 28 companies that offer commercial liability and property insurance to find the best small business insurance companies.
- Acuity
- Allianz
- Allstate
- Chubb
- Cincinnati Insurance
- Clear Blue Insurance
- CNA
- Farmers
- Frankenmuth Insurance
- Travelers
- Westfield Insurance
Independent Contractor Liability Insurance FAQs
Do 1099 workers need general liability insurance?
As a 1099 worker, you may be required by state law to have general liability insurance or your client may require you to have it. For example, if you are an independent contractor who performs electrical work, your client may require you to have it before you start the job.
As a 1099 contractor, you can be sued as easily as any small business. If this happens and you don’t have general liability insurance, you will likely be on the hook for all legal costs, settlements and judgments.
What factors influence the cost of independent contractor liability insurance?
Many factors affect the price you pay for independent contractor liability insurance, including how much coverage you buy.
Some businesses are riskier to insure than others. For example, if you provide services to the public, there may be a greater risk of being sued. This can be reflected in a higher premium cost for general liability insurance.
The insurance policy’s deductible also plays a role in your overall cost. Even factors like where your business is located and the number of years you have been in business might impact your cost.
What’s the difference between contractor insurance and independent contractor insurance?
The insurance needs of these two types of contractors are often the same. They both need general liability coverage, but contractors may have their own specific coverage needs. For example, they might need builders risk insurance, which covers property and raw materials during a construction project.
How can an independent contractor be held liable?
There are many ways in which an independent contractor can be held liable. For example, a plumber who damages a client’s property could be sued. Another example is a freelance writer who is sued for copyright infringement.
Independent contractor liability insurance pays for your legal costs, judgments and settlements stemming from accidental injuries to others, accidental property damage to others and other types of problems like advertising injury, reputational harm and copyright infringement.
