General Liability Insurance for Independent Contractors: Coverage and Importance

Author:Shelden SmollanChief Experience Officer
Shawn Redford
Reviewed by:Shawn RedfordChief Business Development Officer
August 11, 2023
13 Minute Read

As an independent contractor, it's crucial to understand the importance of protecting yourself and your business through proper independent contractor insurance.

Two people sitting at a desk discussing paperwork

Understanding Insurance Requirements for Independent Contractors in the USA

In today’s ever-evolving job market, more and more individuals are choosing the path of independent contracting. Whether it’s freelancing, consulting, or other business, the allure of flexible hours, autonomy, and the opportunity to be your own boss has driven a significant rise in the number of independent contractors across various industries in the United States. However, as an independent contractor, it’s crucial to understand the importance of protecting yourself and your business through proper independent contractor insurance.

In this blog post, we will delve into the insurance requirements that independent contractors need to consider in the USA. Navigating the world of insurance can be complex, especially when you’re responsible for your own coverage. We’ll break down the essential types of insurance that independent contractors should prioritize, explain the key considerations for each, and provide useful insights to help you make informed decisions about your coverage needs.

Safeguard Your Independent Contracting Journey: Unleash the Power of Proper Insurance Coverage!

While many independent contractors may assume that they are exempt from certain insurance requirements, it’s essential to note that even with the freedom and flexibility of being self-employed, there are certain risks and liabilities that cannot be overlooked. Understanding the appropriate insurance policies for your specific line of work is not only a legal obligation in some cases, but it also serves as a safeguard against unforeseen circumstances that could potentially cripple your business and personal finances.

Insurance for an Independent Contractor

Whether you’re an independent contractor or small business owner in the realms of IT, marketing, construction, or any other profession, understanding the nuances of general liability policy requirements is vital for securing your financial well-being and establishing a solid foundation for your contracting business. By arming yourself with the necessary knowledge and resources, you can confidently navigate the insurance landscape and make informed choices tailored to your specific business owner’s policy.

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General Liability Insurance in Action: General Liability Coverage

General Liability Insurance is very important for independent contractors and small businesses in the United States to mitigate the risk of any property damage or legal action. General liability coverage acts as a form of financial protection in the event that something unforeseen arises when working on projects. It safeguards the insured from incidents beyond their control, such as an employee causing personal or property harm while on the job site. 

Small business owners can enjoy complete peace of mind knowing they are getting adequate coverage with reasonable premiums and terms in case something unanticipated happens related to their operations. While there is no guarantee that exposures won’t occur, General Liability Insurance plays an important role in bolstering confidence in your day-to-day activities so you can remain successful into the future.

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How Does Professional Liability Insurance Coverage Protect Independent Contractors?

Professional liability insurance coverage is an important element when it comes to protecting independent contractors against a variety of risks. This form of insurance helps indemnify individuals from damages incurred due to errors or omissions in their professional work. The specific errors and omissions insurance include fraud, court costs, business assets, medical bills, personal injury, errors regarding project specifications, and incorrect concepts regarding duties. Additionally, a contractor’s policy may be reinforced with cyber liability coverage and business interruption insurance if something does go wrong. Professional liability insurance protection offers great peace of mind for independent contractors that something will be there to support them as part of business operations.

Professional Liability Insurance for Independent Contractors: Small Business Insurance

For many independent contractors in the USA, having general liability insurance is a must to protect their business against any potential third-party harm or property damage claims. However, it’s important to note that general liability coverage doesn’t always extend to cover errors or omissions related to professional services rendered. This is where professional liability insurance comes into play. Also known as errors and omissions insurance, professional liability insurance provides coverage for mistakes made in professional services rendered, such as wrongful advice or a failure to deliver promised services.

As an independent contractor, having both general liability insurance and professional liability insurance can provide added peace of mind knowing you’re protected against a range of potential risks.

Contractor going over blueprints with a couple

Benefits of Commercial General Liability Insurance

Commercial General Liability (CGL) insurance is a crucial coverage option for businesses, providing protection against a range of liabilities and risks. Here are some key benefits of having Commercial liability insurance:

  1. Protection against third-party bodily injury or business property damage: CGL insurance helps cover the costs associated with bodily injuries or harm to property caused to someone else by your business operations. This can include medical expenses, legal fees, and potential settlements or judgments.
  2. Coverage for advertising and personal injury claims: Insurance for independent contractors typically provides protection against advertising and personal injury claims. These claims can include instances of defamation and copyright infringement. In the event that your business is faced with a lawsuit resulting from such claims, having CGL insurance can help cover the associated legal expenses.
  3. Product liability coverage: If your business manufactures, sells, or distributes products, there is a risk of those products causing harm to consumers. CGL insurance can provide coverage for product liability claims, including legal costs and potential settlements if a product is found to be defective or causes injury.
  4. Completed operations coverage: If your business provides services or completes projects for clients, there is a potential risk that errors, omissions, or negligence in your work could cause harm or financial loss to others. CGL insurance can offer coverage for claims arising from completed operations.
  5. Legal defense coverage: CGL insurance typically includes coverage for legal defense costs, even if a claim against your business is groundless or fraudulent. The insurance company will help pay for legal representation, which can be significant in defending your business’s reputation and financial interests.
  6. Peace of mind and business continuity: Having CGL insurance provides peace of mind, knowing that your business is protected against unforeseen liabilities and legal challenges. It allows you to focus on your core operations without worrying about the financial implications of a lawsuit or damage claim.
  7. Contractual requirements: Many clients, vendors, or business partners may require you to have CGL insurance before entering into a contract or agreement. Having this coverage in place helps you meet contractual obligations and opens doors to potential business opportunities.
  8. Reputation protection: In the event of an incident or accident, CGL insurance can help protect your business’s reputation by addressing claims promptly and professionally. This can contribute to maintaining customer trust and loyalty.
  9. Commercial property insurance: Commercial property insurance is a critical type of coverage that protects businesses against potential losses and damages to their physical assets like buildings, equipment, business premises, furniture, and inventory. Whether it’s due to natural disasters, theft, or accidental damage, this insurance can help businesses recover financial losses and get back on their feet quickly. It’s an essential safeguard for any business owner, as it provides a layer of protection for the significant investments made in their commercial properties. With commercial property coverage, businesses can operate with the confidence that they have a safety net should unexpected events occur.

It’s important to note that the specific coverage and limits of an independent contractor insurance policy can vary, so it’s crucial to carefully review the terms and consult with an insurance professional to ensure the policy adequately meets your business’s needs. 

Overall, CGL insurance provides essential protection for businesses, shielding them from potential financial losses, and helping to ensure their long-term success.

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Save Money with a Business Owner’s Policy: A Cost-Effective Approach to U.S. Commercial Insurance

If you’re considering purchasing both general liability and commercial property insurance in the U.S., one cost-effective approach could be to opt for a Business Owner’s Policy (BOP). This type of policy integrates both types of coverage under a single umbrella, generally leading to lower premiums than if you were to acquire each policy individually from an insurer.

Why Is It Important To Ensure Your Freelancers Are Covered?

When you hire freelancers, it’s crucial to ensure that they are covered by general liability insurance and professional liability insurance. This coverage not only protects your freelancers from accidents but also shields your company from financial losses in the event of an incident. General liability coverage is designed to protect the individual freelancer from physical or property damages caused by their actions. 

Professional liability coverage, on the other hand, protects your company from any legal repercussions that may arise due to the errors committed by your freelancer (errors and omissions insurance). By ensuring that your freelancers are covered, you can help build a strong, collaborative relationship with them by demonstrating your commitment to their safety and well-being. It’s essential to make sure your freelancers are adequately insured and protected to avoid any financial or legal setbacks that might crop up in the long run.

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Essential Insurance Needs for Independent Contractors: Which Professions Require Coverage?

Insurance needs for most independent contractors can vary depending on the nature of their work. However, several professions commonly require insurance protection to protect against potential risks and liabilities. Here are some professions that often need carry professional liability insurance for independent contractors:

  1. Construction and Tradespeople: Contractors in the construction industry, such as carpenters, plumbers, electricians, painters, repair contractors, and general contractors, often require insurance policy protection. This may include general liability insurance, lost wages, contractor’s liability insurance, and workers’ compensation insurance.
  2. IT Professionals: Independent contractors working in information technology, including software developers, IT consultants, and network administrators, should consider professional liability insurance. This coverage protects against claims of professional negligence, errors, data breach, or omissions in their work.

    Additionally, for independent contractors who handle sensitive client data or operate in the digital realm, considering cyber liability insurance is essential. Cyber liability insurance helps protect against financial losses and legal expenses resulting from data breaches, cyber-attacks, or other cyber incidents that could compromise the security and privacy of client information.

  3. Creative Professionals: Freelancers and self-employed in creative fields like graphic design, photography, videography, and copywriting may need professional liability insurance to protect against claims of copyright infringement, intellectual property disputes, missed deadlines, or negligence in their services.
  4. Consultants and Business Advisors: Independent consultants and business advisors, independent insurance agents, including management consultants, HR consultants, and financial associates, should consider professional liability insurance. This coverage protects against claims of professional errors, inaccurate advice or service-related negligence, and other professional liabilities.
  5. Healthcare and Allied Health Professionals: Independent healthcare professionals such as doctors, nurses, therapists, and medical technicians may require professional liability insurance or malpractice insurance to protect against claims of medical errors or negligence.
  6. Real Estate Professionals: Independent real estate agents, brokers, property managers, and appraisers often need professional liability insurance to cover potential errors, omissions, or negligence in their services.
  7. Event Planners and Wedding Planners: Independent event planners and wedding planners may benefit from liability insurance protection to protect against physical  damage to property, customer injury, legal costs, or other liabilities that may arise during events they organize.
  8. Personal Trainers and Fitness Instructors: Independent fitness professionals, including personal trainers, yoga instructors, and fitness coaches, may need liability insurance to protect against claims of bodily injury or destruction of property during training sessions or classes.

These are just a few examples, and the insurance needs for contractors can vary widely depending on the specific industry, scope of work, and potential risks involved. 

It’s crucial for independent contractors to assess their unique circumstances, consult with insurance professionals who have connections with multiple carriers, and determine the appropriate protection coverage to protect themselves and their businesses effectively.

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Risks Faced by Independent Contractors Without Insurance

As an independent contractor, it’s important to recognize the risks you face without proper insurance coverage. While it may seem tempting to forgo the expense of independent contractor insurance, it’s actually a critical investment in your business. 

Without general liability insurance, for example, you could be held financially responsible for any accidents or damage that occurs while you’re providing services, whether it’s accidental bodily damage or physical harm to property. 

If your work involves offering advice or expertise, professional liability insurance can protect you from legal costs related to errors or omissions. Don’t wait until it’s too late – safeguard your business with the proper insurance policy today.

Your Trusted Business Insurance Partner: Protecting Your Success Together!

The term “business insurance partner” refers to an insurance company or provider that collaborates with businesses to offer insurance plans and solutions tailored to their specific needs. This partner plays a crucial role in assessing risks, providing insurance policies, managing claims, and offering ongoing support to ensure businesses have the necessary protection in place. 

The specific business insurance carrier would depend on the company or individual seeking coverage, as there are numerous insurance carriers operating in the market. It’s important for businesses to research and select a reputable and reliable insurance carrier that aligns with their requirements and offers comprehensive coverage options.

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As an independent contractor, it’s important to take steps to protect your business from potential risks and liabilities. One way to do this is by obtaining your own insurance protection. Having your own policy ensures that you are protected against potential financial losses in case of unforeseen events such as accidents, damage to property, or theft. 

In addition to having your own insurance, you may also need to consider adding clients or other third parties as additional insured on your policy. This provides additional protection for them and can help give them peace of mind when working with you. It also helps ensure that you are held responsible for any damages or injuries caused by your work. 

If you offer delivery services as part of your business, you may also want to consider commercial auto insurance to protect your vehicle and any goods being transported. This coverage can provide protection against accidents, theft, and other risks associated with transportation. 

Working with clients can sometimes lead to disputes or legal actions. In such cases, having an insurance policy can help protect you from financial losses that may result from legal proceedings. Some clients may also require proof of insurance before hiring you, so having adequate coverage can help you win more business.

To ensure that you are getting the right insurance liability coverage for your needs, it’s a good idea to work with a trusted insurance provider or consult with professional Associates at Experior Financial Group Inc. By taking the time to understand your risks and obtaining appropriate coverage, you can help safeguard your business and your financial future as an independent contractor.

FAQ

Which insurance provides protection to independent contractors?

Insurance designed to protect independent contractors provides coverage for losses related to their business operations. This can include general liability insurance policy, professional liability, workers’ compensation, and errors & omissions insurance.

How much is freelance liability insurance?

The cost of freelance liability insurance depends on factors such as the type of policy, coverage limits, and deductible amounts. A basic policy may cost anywhere from a few hundred dollars to several thousand, depending on the level of coverage desired. It’s a good idea to consult with Experior agents or insurance producers to help determine what is the best coverage options for your specific needs. 

What is contractors professional liability insurance?

Contractors’ professional liability insurance protects independent contractors against claims for negligence or errors in their work. This type of policy can cover losses related to physical harm to property caused by the contractor while performing their duties. It also covers legal fees and settlements associated with any related claims. 

What other types of insurance do independent contractors need?

In addition to professional liability insurance, 1099 workers may need other forms of insurance depending on their industry. These can include general liability, workers’ compensation and errors & omissions insurance. Each type of policy protects against specific risks, such as loss of property value or injuries sustained on the job. 

1099 workers should speak to an insurance broker about their particular needs to find the right coverage. Additionally, independent contractors may want to purchase business interruption and cyber liability policies if they own a business. These policies provide financial security and peace of mind in case of unexpected events. 

What is 1099?

Form 1099 is a tax form used in the United States to report income received by individuals who are not employees but rather independent contractors, freelancers, or other self-employed individuals. The purpose of the form is to provide information to the Internal Revenue Service (IRS) about the income earned by these individuals, which helps ensure accurate reporting and payment of taxes.

When a company or person pays an independent contractor $600 or more during a tax year, they are required to issue a Form 1099 to both the contractor and the IRS. The form includes important details such as the contractor’s name, address, taxpayer identification number (usually their Social Security number or employer identification number), and the amount of income earned.

What is the Cost of Liability Insurance for an Independent Contractor?

The cost of liability insurance for independent contractors can vary based on several factors, including the type of work performed, industry, location, desired coverage limits, and claims history. Independent contractor insurance cost typically obtained through policies like Commercial General Liability (CGL) or Business Owner’s Policies (BOP), which offer various types of coverage depending on the contractor’s needs.

To determine the cost, it is recommended to request quotes from insurance providers based on specific circumstances and coverage requirements. Insurance companies assess risk factors and provide premium estimates accordingly. While cost is important, obtaining adequate coverage is crucial for financial well-being. Consulting with an insurance professional ensures the coverage obtained is suitable for the contractor’s unique needs.

Build Your Independent Insurance Agency with Experior Financial Group, Inc.

Experior Financial Group, Inc. can be the perfect place for independent minded individuals to start their career. We offer a tri-brid model unique in the industry and agents have access to a plethora of insurance partners. We offer low monthly fees for agents to have administrative support and our CRM is included for no additional cost. To find out more about our advancement opportunities, how you can be awarded shares in the company and how our Legacy certificate could work for you and your family. Reach out to us today!

Read more: Independent Agents & Brokers of America

Shelden Smollan
Shelden Smollan, Experior Financial Group's Chief Experience Officer, has spent more than 45 years working in the fields of Life Insurance and finance. He is an excellent insurance sales and management executive with exceptional strategic thinking, marketing, and leadership abilities. He has been Experior Financial Group Inc.'s Chief Experience Officer for the past six years, and his vision and expertise have been instrumental in the company's growth and development. By arranging meetings between agents and carriers so that our team of associates can learn from them and draw inspiration from them, he has assisted our IMO in expanding.