What is Independent Contractor Insurance? - Cherokee Insurance Center Skip to main content

What is Independent Contractor Insurance?

As a 1099 self employed contractor you have all the benefits of making your own schedule, working with whom you want, charging what you want, but you also have some major responsibilities too. You are completely responsible for your own actions and business. This includes mistakes, acts of nature, or accidents. Under those circumstances, Independent Contactor Insurance protects you and your business.

When working for an employer, you don’t personally have to worry about the risks that a lawsuit or judgement could have against your personally. Being a 1099 contractor, you must worry about the financial burden it can cause against you and the business you have worked to build. Independent Contractors Insurance removes that financial burden that could happen in the blink of an eye.

How does Independent Contractor Insurance Work?

Independent Contractor insurance protects contractors and freelancers from being held responsible for the following:

  • Bodily injury and death
  • Property damage
  • Negligence
  • Breaches of contract
  • Malpractice
  • Errors and omissions
  • Misrepresentation
  • Advertising or reputational injury
  • Business interruptions
  • Lost income
  • And other risks

In addition, there are other situations or issues that an independent contractor can be liable for. If you think you may be affected by something not listed, contact your local independent insurance agent to make sure you are covered. After all, you don’t have to be a millionaire to be sued like a millionaire.

Types of Independent Contractor Insurance

Independent Contractor Insurance is made up of many different types of insurance such as General Liability insurance, Business Owners Policy (BOP), and Professional Liability insurance. Your line of work and risks will determine the type of policy that would suite you and your business best.

 

General Liability Insurance

General Liability Insurance (GL) is the most popular form of business insurance among independent contractors.  Some clients or customers may require you to have a General Liability insurance policy before hiring you even if your state or industry doesn’t require it. However, many states and industries do require you to have a general liability policy.

Some matters that General Liability insurance protects you against are:

  • Injury or death caused to another person (other than an employee)
  • Damage done to a client’s or customer’s property
  • Reputational harm (libel and slander)
  • Advertising injury (copyright infringement, advertising infringement)
  • Invasions of privacy

Business Owners Policy

Business Owners Policies (BOP) combines business property and business liability insurance into one policy.  This type of policy is considered a combination policy as it brings together two types of coverages in one policy.

Some matters and items that a Business Owners Policy would cover on top of General Liability coverage are:

  • Building
  • Property and building contents
  • Lost net income because of ceasing or reducing your business operations
  • Expenses required to keep your business running following an interruption
  • Equipment breakdowns

Business Owners Policies are tailored to you and your business by your agent. They ensure your equipment, building and you are covered.

 

Professional Liability Insurance

Professional Liability Insurance (PL) is not the same as general liability insurance. General liability refers to if bodily or personal injury or damage to property occurs while running a business. Whereas, Professional Liability insurance covers the actions, advice, mistakes, and/or omissions of the professional themselves. For example, this policy comes into play should a client file a lawsuit claiming that your professional advice has led them to misfortune.

Some professions that benefit from professional liability insurance are but not limited to:

  • Architects
  • Financial Advisors
  • Accountants
  • Engineers
  • Real Estate Brokers
  • Technology Consultants
  • Photographers

However, Professional Liability Insurance strictly applies only to civil suits. It does not apply to a criminal prosecution. If the lawsuit evolves into a criminal investigation and trial, professional liability will no longer apply.

Who needs Independent Contractor Insurance?

In short, anyone that is a 1099 contractor. It is your responsibility to protect yourself and your business. Independent Contractor policies are different so get with a professional to have your policy tailored to you and your business.

Keep in mind, many states and industries require you to be insured. Some customers and clients may require it as well. In addition, some clients require you to list them as “additional insureds” on your policy. This does not give them any control over your insurance. This is just simply extending your policy’s coverage to them in case they are sued because of work you have done.

Not only is it smart, but it also helps your reputation and marketability of your business.

How much does Independent Contractor insurance cost?

Unfortunately, independent contractor insurance is not a one size fits all. There is a process called classification, in which carriers group and organize like businesses together. This splits the risks among them. During the classification process, some factors that are considered are:

  • What you do and how risky it is
  • The size of your business (both employees and client/customer base)
  • Where you do your work (city, state, population size)
  • Your track record (how long you’ve been in business, number of claims filed, revenue)
  • Type of certifications and training
  • How long you have been professionally licensed and/or practicing

In addition to the classification, insurance depends on the coverage you purchase as well as the coverage limits. In the grand scheme, paying an insurance premium is way better than unexpectedly paying millions of dollars.

How to buy Independent Contractor insurance?

Contact your local independent agent. They can help answer any questions you have and get you started on a policy that best fits you and your business. If you don’t have a local independent agent, start a quote online or call us at (770) 720-1314.