The small business owner's guide to contractor liability insurance
Does my small business insurance cover independent contractors?
If your independent contractors need coverage, you can add an independent contractor to your own insurance coverage as an additional insured, either for a single event or for as long as you have the policy. You can do so by notifying your insurance provider, and your premiums or deductible may be adjusted to account for this.
What insurance coverage am I required to carry for independent contractors?
If an independent contractor is not insured, you may be held liable for any lawsuits related to their work, whether it’s for an injury caused by an accident, illegal behavior, or poor workmanship.
Commercial auto insurance is required in most states for any business-owned vehicles. If a contractor is driving a vehicle owned by your business, you ought to make sure they’ll be covered in case of an accident.
If they are often driving their own business vehicle, then it may also be a good idea to ensure they have their own coverage in place. You could ask your contractor to show a certificate of insurance as proof of coverage.
Top business insurance policies for independent contractors
[video: an animated header displays the Insureon logo. Underneath it, a subheading displays the text: "What insurance coverage do independent contractors need?"]
MALE VOICEOVER: As an independent contractor, there are many perks you can enjoy like work flexibility and tax deductions. However, you aren't free from the risks larger businesses often face. With business insurance, you can safeguard your personal assets and your business from costly repairs, legal fees, and medical expenses. There are several insurance policies that provide sustained peace of mind and protect your business. Let's take a closer look at some top policies.
[video: an illustrated header displays the text: "General liability covers:"]
[video: Under above header, three bullet points display the text: "Slip-and-fall accidents"; "Client property damage"; "Product liability lawsuits"]
General liability insurance covers third-party accidents, such as customer injuries or property damage.
[video: an illustrated header displays the text: "Professional liability covers:"]
[video: Under above header, three bullet points display the text: "Accusations of negligence"; "Missed deadlines"; "Errors that cost clients clients money"]
Professional liability insurance, sometimes called errors and omissions coverage, will protect your business from lawsuits related to work mistakes and oversights.
[video: an illustrated header displays the text: "Workers' comp covers:"]
[video: Under above header, three bullet points display the text: "Work-related medical expenses"; "Disability benefits"; "Lawsuits from employee injuries"]
Workers' compensation insurance is required in most states and can shield you from work-related medical costs.
[video: an illustrated header displays the text: "Cyber insurance covers:"]
[video: Under above header, three bullet points display the text: "Data breach notification costs"; "Data breach investigations"; "PR costs for reputational harm"]
Cyber insurance can help your business financially recover from data breaches and cyber attacks.
[video: an illustrated header displays the text: "Commercial property covers:"]
[video: Under above header, three bullet points display the text: "Fires"; "Storm damage"; "Equipment theft"]
Commercial property insurance covers costs if your business property is damaged, destroyed, or stolen.
[video: an illustrated header displays the text: "A BOP covers:"]
[video: Under above header, three bullet points display the text: "Client accidents"; "Stolen or damaged property"; "Business interruptions"]
A business owner's policy or BOP bundles general liability and commercial property coverage together, and is usually less expensive than buying each of these policies individually.
[video: an illustrated header displays the text: "Commercial auto covers:"]
[video: Under above header, three bullet points display the text: "Auto accident injuries"; "Property damage caused by vehicles"; "Vehicle theft and vandalism"]
Commercial auto insurance protects your business from costs related to an auto accident involving your company vehicle.
[video: an illustrated header displays the text: "Fidelity bonds cover:"]
[video: Under above header, three bullet points display the text: "Employee theft or fraud"; "Illegal funds transfer by an employee"; "Client contract requirements"]
Fidelity bonds provide reimbursement to your client if an employee steals from them. These bonds are also sometimes required in contracts.
[video: an illustrated header displays the text: "Why is contractor insurance important?"]
So, why is it important for you to have insurance as an independent contractor?
[video: an illustrated header displays the text: "Contractors may need insurance to:"]
[video: Under above header, three bullet points display the text: "Sign a contract or lease"; "Apply for a loan"; "Comply with federal or state laws"]
You may need coverage to sign a contract or lease. You also might need insurance to comply with federal, state, or local laws.
[video: an illustrated header displays the text: "Insurance can also help:"]
[video: Under above header, three bullet points display the text: "During business closures"; "Gain client trust"; "Attract talent"]
Insurance also protects you from catastrophic losses that could stop your services. Plus, the right coverage can help you gain a client's trust.
Get the best coverage for your business with Insureon today.
[video: an illustrated white header displays the text: "Insureon is your #1 agency for small business insurance"]
Click the link to get started.
[video: an animated header displays the Insureon logo]
Do I need workers’ compensation for my contractors?
Workers’ compensation insurance is required in most states for any business with employees. For more dangerous occupations, such as construction contractors, workers' comp may be required for anyone working on a job site.
Workers’ comp covers work-related bodily injury and illness, which are unlikely to be covered by regular health insurance. Workers’ comp not only covers medical expenses, it can also offset lost wages if someone is unable to work.
Workers’ compensation coverage is available for independent contractors, but not all contractors buy this for themselves. If you’re a general contractor, you may have to provide this coverage for your subcontractors, depending on the type of work they do.
Make sure to check with your insurance company and your state's workers' comp laws to ensure that your business, employees, and contractors are protected.
What additional insurance policies should I carry to cover any independent contractors that I hire?
General liability insurance
Many small business owners add contractors to their general liability policy, which is often the first insurance policy that a new business owner pursues.
General liability insurance covers common business risks like customer injuries, customer property damage, and advertising injury. It’s often required to sign leases and contracts, and you may have to show a certificate of liability insurance as proof you have liability insurance coverage.
Keep in mind that any lawsuit against one of your contractors will likely impact you as well. Including contractors in your coverage not only provides you and them with protection, but it could also make contractors more willing to work with you, as well.
Business owner's policy (BOP)
A business owner’s policy (BOP) combines your commercial property insurance and your general liability insurance policies.
This combined policy is usually less expensive than buying each of these coverages separately, helping you save money while providing extended coverage for your business and your contractors.
Professional liability insurance
Professional liability insurance, also called errors and omissions insurance, covers mistakes and oversights that your contractors make when carrying out professional services (e.g., IT security work, consulting, etc.).
If a customer sues you or your contractor for unsatisfactory work or for failing to meet a deadline, your professional liability policy would help cover your legal fees.
Hired and non-owned auto insurance (HNOA)
If you, your employees, or contractors use any personal, leased, or rented vehicles for your business, you should consider hired and non-owned auto insurance (HNOA). Your personal or commercial auto insurance coverage is unlikely to cover such vehicles in a work-related accident.
Surety bonds
You may need to provide a surety bond to qualify for certain contracts. Also known as a performance bond, surety bonds act as a contract between yourself, your client, and the insurance company that issues the bond. The insurance company pays the bond amount to your client if you fail to deliver on a contract.
How to buy small business insurance from trusted carriers with Insureon
If you’re ready to get your business and your contractors insured, complete Insureon’s easy online application today to compare free quotes from top-rated U.S. carriers. You can also consult with an insurance agent on your business insurance needs. Once you find the right types of coverage for your small business, you can begin coverage in less than 24 hours.
Mike Mosser, Content Specialist
Mike spent several years as a reporter and editor covering politics, crime, and the world financial markets. He’s worked for several newspapers, a financial newswire, and a monthly magazine. As a copywriter, Mike has produced SEO-based content, marketing, public relations, and advertising work for a variety of companies.
