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Independent Contractor Insurance – Everything You Need To Know

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We are pretty sure that you are familiar with insurance and that they serve as protection against losses.

Suppose you own a house. The homeowner’s insurance protects you from events like fire or unexpected accidents like a neighbor hurting himself on your sidewalk.

So, just as you need protection against house-related losses, a 1099 worker needs independent contractor insurance too.

A 1099 insurance protects the independent contractor from business-related losses.

This is a one-stop article where you will find all the must-know information related to independent contractor insurance.

So, start reading!

What Is Independent Contractor Insurance?

Independent contractor insurance is insurance for 1099 workers that protects against general liability, business operations, or business-owned property of an independent contractor.

The independent contractor liability insurance is important for the 1099 workers. Since independent contractors are prone to liability like large firms, the 1099 insurance protects them and their business from these liabilities.

Why does an Independent Contractor Need General Liability Insurance?

General liability insurance for independent contractors ensures that they stay protected.

Like any other firm, an independent contractor might be sued or held liable for damages. Hence, independent contractor liability insurance is essential.

Below, we have explained the reasons why independent contractor insurance is needed.

  • It protects independent contractors and their businesses

An independent contractor liability insurance protects them from the different liabilities that they are exposed to. Independent contractors might be sued by firms/ clients, harmed physically, or even face an advertising injury, like any other business. In such cases, general liability insurance for independent contractors helps in covering the legal fees and damage that might result from a lawsuit.

  • The law might require independent Contractor insurance

Like construction, state laws and regulations require independent contractors to have general liability coverage in a few industries. In such cases, it is always better to get separate insurances for you and the independent contractor.

  • Clients of independent contractors might demand a 1099 insurance

Often the clients of independent contractors demand the 1099 worker to have independent contractor insurance before signing a contract. Without this 1099 insurance, the clients could be held responsible for alleged accidents or wrongdoings caused by the independent contractor or their work.

What do Independent Contractors General Liability Insurance Cover?

General liability insurance for independent contractors is essential, especially in industries like construction.

However, independent contractors should look into the general liability insurance for 1099 contractors even in other industries.

The insurance for 1099 workers can help cover the following claims caused by businesses:

  • Property Damage – Physical damage or destruction caused to tangible property. This includes all the resultant loss of use of the property.
  • Bodily Injury – Sickness or disease, an injury sustained by the individual, including death caused by your business.
  • Advertising Injury – This includes injury arising out of copyright infringement, or using someone else’s idea for advertising, etc.
  • Reputational harm – Any injury arising out of slander or violation of individual privacy or malicious prosecution.

What Does Independent Contractor Insurance Typically Exclude?

General liability insurance for independent contractors might not cover everything. While we have listed what the independent contractor insurance covers, there are certain aspects that it does not cover.

There are certain claims for which independent contractors will need different types of independent contractor insurances (we have discussed this later!).

Here’s what general liability insurance won’t help you with.

  • Damage to their own business property – Damage caused to business property or equipment. Here, commercial property insurance will be helpful
  • Injuries and illness – Illness or injuries as a consequence of work. A workers’ compensation injury is a must for protection against illness and injuries resulting from work
  • Illegal acts – Wrongdoing or illegal acts committed on purpose by independent contractors or their employees
  • Claim costs that exceed policy limit – General liability insurance doesn’t cover expensive claims. For covering expensive claims, commercial umbrella insurance will be helpful.

Who Needs 1099 Contractor Liability Insurance?

We have said that independent contractor insurance is important for 1099 workers. But who needs the 1099 insurance?

Here is a list of job roles that require independent contractor liability insurance.

  • Painters
  • Plumbers
  • Carpenters
  • Graphic designers
  • Freelance writers and editors
  • Repair contractors
  • House and carpet cleaners
  • Independent construction contractors
  • Horse or dog trainers
  • Independent salon professionals and hair stylists
  • Electrical contractors

In the case of construction workers or electrical contractors, independent contractor insurance is essential. It is due to the risky nature of the job. Even businesses and state laws, at times, ask for independent contractor insurance in these industries.

For the other job roles like graphic designers, writers, painters, and other creative professionals, 1099 contractor insurance is a must too. Why?

Because an independent contractor’s liability insurance protects them from copyright infringement, reputational harm, and property damage.

Besides independent contractor liability insurance, these professionals also qualify for health insurance for independent contractors, though not employer-sponsored.

How do 1099 Independent Contractors Get General Liability Coverage?

1099 employees and insurance go hand in hand. However, not all independent contractors are aware of it.

Typically, there are two ways for 1099 workers to get independent contractor insurance. Here they are.

  • Getting their general liability policy

The first way to get independent contractor insurance is to apply and get their policy. Independent contractors can buy general liability insurance for independent contractors from insurance providers.

Plus, the independent contractors can also request a certificate of insurance from their provider to show a client that they are covered.

  • Firms adding independent contractors to their general liability policy as an additional insured

This is the second way of getting general liability insurance for independent contractors. When employers provide 1099 workers with general liability insurance, the independent contractors are covered for the project duration or longer.

As a business, you can add multiple contractors to your general liability policy. However, this is quite expensive for your firm to add independent contractors to your general liability policy. You may decide this depending on the situation.

Considering both options, independent contractors getting their general liability policy is the more cost-effective one.

What other Kinds of Insurance Does an Independent Contractor Need?

Besides general liability or health insurance for independent contractors, there are several other independent contractor insurances that a 1099 worker might need. Here’s a list of a few insurances.

  • Workers’ Compensation Insurance – This insurance provides coverage benefits to employees with work-related injuries or illnesses.
  • Business Income Insurance – This independent contractor insurance helps independent contractors recover lost income as a result of a covered loss.
  • Commercial Auto insurance helps independent contractors cover the damages of a vehicle if they use one for business purposes.
  • Errors and Omissions Insurance – This independent contractor insurance helps protect them from claims of making an error in their professional services.
  • Commercial Property Insurance – This insurance helps protect the equipment and tools that independent contractors use for their work.
  • Cyber liability insurance – This independent contractor insurance helps protect the data and private information of 1099 workers. For instance, independent contractors accepting credit cards might need this insurance in case of data breaches.

Can an Independent Contractor be held Liable for Damages?

An independent contractor can be held liable for damages and can be sued by businesses as well. It is the same with independent contractors as it is with other small business owners.

So, without business insurance for independent contractors, they will have to pay for legal or court expenses from their own pockets. With independent contractor insurance, these expenses get covered.

Also, independent contractors are everywhere. We mean that they belong in different industries. Thus, they are exposed to different risks. Let us explain this with an example.

An independent contractor who is a photographer hired for a photoshoot is exposed to the risk of copy infringement. But a 1099 worker hired to remodel a room is exposed to the risk of potential injury to the home owner.

With a 1099 contractor insurance or a general liability policy, both these risks are covered.

General Liability Insurance Cost for Independent Contractors

‘How much does independent contractor insurance cost?’ – this is a common question that pops up in the minds of independent contractors, especially the ones who just got started.

Well, the independent contractor insurance cost is dependent on several factors like;

  • their business location,
  • risk exposure,
  • length of time as a business; and
  • policy details such as coverage limits and deductible amount

Independent contractors must shop around general liability insurance quotes from various insurance providers to get the best deal.

Typically, a 1099 insurance costs an average of $42 a month. On the other hand, the average cost of a slip and fall accident is $20,000. Having to pay 20000 bucks from personal funds might impact the business adversely. But, having an independent contractor liability insurance can protect this huge expense.

Most small businesses, choose the standard scheme of $1 million per occurrence and $2 million average policy limit. However, independent contractors can choose their independent contractor insurance depending on their business situations and budget.

Benefits of being an Additional Insured other than the Independent Contractors

As we have said that there are two ways of getting independent contractor insurance for 1099 workers.

One is self-purchase, and the other is the business adding them to their policy as an additional insured. The latter has certain benefits which have been discussed in this section.

An additional insured is anyone covered by an insurance policy besides the policyholder. Though an additional insured has less protection than a policyholder, there are still certain gains from being an additional insured.

  • Defense coverage – The first benefit is defense coverage. If an independent contractor (or the additional insured in this case) sued by a third-party over work performed for the business, the employer’s policy can address the claim. The additional insured can get coverage for court expenses, lawyers’ fees, and settlements.
  • Third-party lawsuit coverage – An additional insured might receive coverage when sued by a third party over property damage, physical injury, and advertising injury.

Who’s Responsible for Adding Insured to Independent Contractors?

Like businesses owners can add additional insured to a general insurance policy, independent contractors can also add business owners or employers to their policy.

So, who’s responsible for adding the additional insured? The business owner or the independent contractor?

Well, it depends a lot on the prevailing scenario. Plus, it depends on the practices of the industry.

In independent contractors’ work contracts, generally, there are insurance obligations that they must abide by. These contractual requirements often state whether or the independent contractor needs to add the business as an additional insured in their policy.

The practices of independent contractor insurance vary across different industries. So, it is always better for 1099 contractors to ask their insurance providers about the cost and benefits of  the self-purchase of policy and being added as an additional insured.

Hire Independent Contractors Seamlessly with Multiplier

It is pointless to waste time trying to figure out more on independent contractor insurance. More so if you are a budding entrepreneur and you have a lot to work on.

But who will handle independent contractor insurance and everything else in this regard? The answer is – a SaaS-based onboarding solution called Multiplier.

Multiplier, a self-service onboarding tool, can assist you with the following tasks:

  • Creating valid contracts to smooth your collaboration with freelancers and independent contractors
  • Making timely payments to the global freelancers at the same time
  • Tracking all freelancers within a single dashboard
  • Providing various bonuses and benefits to freelancers

Want to know more? Start your free trial!

Hiring and onboarding using Multiplier ensures you hire remote talent with locally compliant, fool-proof job contracts, offer emphatic benefits and disburse salaries accurately with absolutely nil errors in payrolls.

Hiring and onboarding using Multiplier ensures you hire remote talent with locally compliant, fool-proof job contracts, offer emphatic benefits and disburse salaries accurately with absolutely nil errors in payrolls.​

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