As an independent contractor, you’re your own boss. You have the freedom to choose what projects to take on and when. However, if you’re not careful, this freedom can come with serious risks. So, it’s crucial to be proactive about protecting yourself with insurance policies—such as independent contractor insurance—that cover you in the event of a loss or injury.
This post serves as a compact guide to help you make the right choice.
What Is An Independent Contractor?
An independent contractor is a person or company that provides professional services to others. Independent contractors are not employees. They’re self-employed and can work for multiple customers simultaneously.
What Is An Independent Contractor Insurance Policy?
An independent contractor insurance policy is a type of trades insurance that typically covers contractors for liabilities arising from work done on behalf of a client. It also covers personal injury and property damage caused by contractors to other people or property while performing their work for the client.
Contractors can take on different insurance policies. However, their decision should depend on what they need the coverage for and why.
Why Do You Need Insurance As An Independent Contractor?
Without a doubt, independent contractors have to take care of their insurance needs. They may have to pay for medical expenses and other expenses. That’s why you need to get an independent contractor insurance policy. Other reasons why you need one are as follows:
- Independent contractors are not eligible for unemployment benefits or other state benefits if laid off.
- They can’t take advantage of employer-sponsored health insurance plans.
- They don’t get paid time off when needed, and their work schedule is unpredictable.
- They don’t have a retirement plan from their employer, so they have to set one up on their own, which can be expensive and time-consuming to maintain.
- Clients may not pay independent contractor invoices promptly. This delay can cause cash flow issues for contractors who have already spent the money on materials or services needed to complete the job.
What Are The Common Insurance Policies For Independent Contractors?
Contractors can get as many insurance policies as applicable as a form of business investment. Some of the most common types of coverage for independent contractors are:
- Health Insurance
- Life Insurance
- Disability Insurance
- Property Insurance
- Car Insurance
- Worker’s Compensation
- General Liability
- Professional Liability
What Does An Independent Contractor Insurance Policy Cover?
An independent contractor insurance policy is designed to cover contractors who work on a project-by-project basis. A contractor indemnity policy will provide coverage for the contractor’s equipment and tools as well as any liability incurred from an accident or injury.
The average cost of an independent contractor insurance policy ranges from USD$150 to USD$200 per month, and it’ll cover the following:
- Any injuries or illnesses that occur while you’re working on the job.
- The cost of any property damage that occurs while working on the job.
- Medical expenses if an injury or illness occurs outside of work.
- The cost of repairing or replacing any property damaged by your work.
- The cost of defending a lawsuit related to your work, including attorney’s fees and court costs.
- Your legal defense if you’re sued for something unrelated to your work, like a car accident in which you were not at fault.
What Do Independent Contractors Need To Know When Shopping For Coverage?
If you’re an independent contractor, you need insights on what you should consider when shopping for coverage for your business. With the right coverage, you can be sure that your financial security is taken care of.
The initial step is to make an honest assessment of your needs. Once you’ve identified your needs, you need to evaluate your existing insurance policies. Risk analysis programs will help determine if the risks outweigh your coverage or vice versa.
If your current insurance policy doesn’t provide adequate coverage, then your insurance policy needs to be redesigned to address your present needs and objectives.
As you may not be well-versed in these matters, you might want to reach out to a representative from a reputable independent contractor insurance company. They’ll discuss the different options available then help you arrive at the best insurance solution for your contracting business.
Conclusion
Contractors are independent workers, and as such, they don’t work full-time for the company that contracts them. This means the company usually doesn’t provide them with benefits such as employer-sponsored healthcare or retirement plans. Therefore, they’re responsible for funding their own healthcare and retirement.
Although contractors have a lot of freedom, they also face considerable risks. Getting insurance could help protect them from those risks. With adequate protection, they can have a financial safety net and some peace of mind.