As an independent contractor, you are responsible for providing your own insurance coverage. One of the most critical forms of insurance for any independent contractor to have is general liability insurance.
This type of insurance provides coverage for damages and injuries caused by your business operations.
In this article, we will explain what general liability insurance is and why it’s important for independent contractors to have it. Additionally, we will provide an overview of the key points that will be covered throughout the article.
Explanation of General Liability Insurance for Independent Contractors:
General liability insurance is a type of insurance that protects businesses and individuals from financial loss resulting from bodily injury, property damage, or personal injury caused by their business operations. This insurance can cover the cost of legal fees, medical expenses, and other damages that may result from a lawsuit. For independent contractors, general liability insurance is essential because it can provide protection against claims made against them for damages or injuries that arise from their work.
Importance of having General Liability Insurance for Independent Contractors:
As an independent contractor, you may be working in a variety of different environments, such as clients’ homes, commercial properties, or public spaces. There is always a risk of accidents occurring, and if you do not have general liability insurance, you may be held responsible for any damages or injuries that occur while you are on the job. Having general liability insurance can protect you from financial ruin in the event of a lawsuit or claim.
Coverage provided by General Liability Insurance:
General Liability Insurance is a type of insurance policy that provides coverage for businesses and organizations against claims made by third parties for bodily injury, property damage, or personal and advertising injury. This type of insurance is designed to protect businesses from financial losses that may arise due to lawsuits or legal claims.
Typically, a General Liability Insurance policy will cover the costs of legal defense, settlements, and judgments that are awarded to the claimant, up to the policy limits. The coverage provided by General Liability Insurance may vary depending on the specific policy, but it typically includes:
- Bodily injury: This coverage provides protection against claims for physical injury or harm caused to a person by the insured or their employees. This may include injuries that occur on the insured’s property, such as slip-and-fall accidents.
- Property damage: This coverage provides protection against claims for damage caused to someone else’s property by the insured or their employees. This may include damage caused by the insured’s products or operations.
- Personal and advertising injury: This coverage provides protection against claims for non-physical injuries, such as defamation or copyright infringement, caused by the insured or their employees.
Exclusions to General Liability Insurance coverage:
While General Liability Insurance provides broad coverage for many types of claims, there are certain exclusions that may limit the coverage provided. These exclusions vary depending on the specific policy, but may include:
- Intentional acts: General Liability Insurance typically does not cover claims that arise from intentional acts or acts of fraud committed by the insured or their employees.
- Professional services: General Liability Insurance typically does not cover claims that arise from professional services provided by the insured or their employees, such as medical or legal services.
- Property damage to the insured’s property: General Liability Insurance typically does not cover claims for damage to the insured’s own property.
- Workers’ compensation claims: General Liability Insurance typically does not cover claims for injuries or illnesses suffered by employees, which would be covered under a separate workers’ compensation insurance policy.
It is important for businesses and organizations to carefully review their General Liability Insurance policy and understand the coverage and exclusions provided, in order to ensure that they are adequately protected against potential claims.
Why do independent contractors need general liability insurance?
Like any other small business owner, an independent contractor can be sued and held liable for damages.
Commercial general liability insurance is essential for independent contractors because:
General liability protects you and your business.
Independent contractors have the same legal obligations and liability exposures as larger firms. They can be sued for damaging client property, causing bodily harm, or advertising injury. General liability insurance helps cover legal fees and damages resulting from a lawsuit.
Your clients want you to have this coverage.
Your clients may require you to have general liability insurance before they sign a contract with you. Without this insurance, they could be held responsible for alleged wrongdoing or accidents caused by you or your work.
It may be required by law.
State regulations sometimes require independent contractors in certain industries, such as construction, to carry general liability coverage. Most often, it’s best for both you and your client to obtain separate general liability insurance policies.
Importance of General Liability Insurance for Independent Contractors
A. Risks faced by Independent Contractors
Independent contractors are individuals who work for themselves and are not considered employees of the companies they work for. They may work in a variety of fields, such as construction, consulting, or event planning. While working as an independent contractor has many benefits, such as flexibility and control over their work, it also exposes them to certain risks.
B. Legal liabilities and financial losses that can occur without insurance
Without the protection of general liability insurance, independent contractors may be personally liable for any injuries or damages that occur while they are working. For example, if a contractor accidentally damages a client’s property or causes an injury to someone while working on a job, they may be held financially responsible for the damages.
Furthermore, lawsuits can be extremely expensive and time-consuming. Without insurance, an independent contractor may have to pay for legal fees and damages out of pocket, which can have a devastating impact on their finances and personal life.
C. How General Liability Insurance can protect Independent Contractors
General liability insurance provides independent contractors with protection against many of the risks they face. This type of insurance covers bodily injury, property damage, and personal injury claims that may arise while the contractor is working. It can also cover the cost of legal fees and settlements in the event of a lawsuit.
By investing in general liability insurance, independent contractors can have peace of mind knowing that they are protected from the financial burden of unexpected accidents or lawsuits. This protection can help them continue to operate their business without fear of catastrophic financial losses.
Factors to Consider When Choosing General Liability Insurance
When selecting general liability insurance, there are several factors that you should consider to ensure that you are adequately protected. The following are the most important factors that you should consider:
A. Coverage limits: Coverage limits refer to the maximum amount of money that an insurance provider will pay out in the event of a claim. When choosing a general liability insurance policy, it is crucial to consider whether the coverage limits offered are sufficient for your business’s needs. You should also consider the types of risks that your business faces and the potential costs of any claims that may arise.
B. Deductibles: Deductibles refer to the amount of money that you will have to pay out of pocket before your insurance coverage kicks in. Higher deductibles typically result in lower premiums, while lower deductibles result in higher premiums. When selecting a general liability insurance policy, you should consider your business’s financial situation and your ability to pay the deductible in the event of a claim.
C. Premiums: Premiums refer to the amount of money that you will pay for your insurance coverage. When selecting a general liability insurance policy, you should consider whether the premiums are affordable and whether they fit within your business’s budget. You should also compare premiums from different insurance providers to ensure that you are getting the best value for your money.
D. Reputation of Insurance Provider: The reputation of the insurance provider is an essential factor to consider when selecting general liability insurance. You should research the insurance provider’s reputation and customer reviews to ensure that they have a good track record of handling claims and providing excellent customer service. Additionally, you should check whether the insurance provider is licensed and regulated by the relevant authorities to ensure that they are a reputable and trustworthy provider.
By carefully considering these factors, you can select a general liability insurance policy that provides adequate coverage and protection for your business at a reasonable cost.
How can an independent contractor be held liable?
Independent contractors can be sued and held liable for damages, just like other small business owners. Without insurance, you would have to pay out of pocket to defend yourself in court and also pay for damages. With a general liability insurance policy, those expenses are covered.
Different industries bring different risks. A 1099 worker hired for a photo shoot faces significantly different risks than one hired to remodel a bathroom. For example, the photographer could be accused of copyright infringement, while the remodeler faces the risk of potential injury to the homeowner.
General liability insurance addresses both issues. Learn more about what general liability insurance covers.
How much does general liability insurance cost?
General liability insurance costs an average of $42 per month for Insureon customers. Your cost is based on a few factors, including:
- Type of work you do
- Policy limits and deductible
- Number of employees
- Claims history
How does an independent contractor get general liability coverage?
There are a few ways for an independent contractor to get general liability coverage:
You can get your own general liability policy. You can purchase commercial general liability insurance from a business insurance provider or agency. To show a client that you are covered, request a general liability certificate of insurance. This option is usually more cost-effective for your clients.
Your clients can add you to their general liability policy as an additional insured. Being an additional insured means you are covered by their insurance for the duration of the job or longer. A business can add multiple contractors to its general liability policy. It’s typically more expensive for clients to include you in their policy as an additional insured. However, they may decide to add you, depending on the situation.
You are covered under a blanket additional insured endorsement. Your clients or the general contract could have a blanket additional insured endorsement on their policy, which extends coverage to a type of worker or a group of people, without naming you specifically.
These options provide protection if either you or your client is faced with a lawsuit over third-party bodily injury, property damage, or reputational harm.
What are the benefits of being an additional insured?
An additional insured is anyone besides a policyholder who is covered by an insurance policy. An additional insured has less protection than the policyholder, but still gains crucial coverage, such as:
Defense coverage. If a third party sues the additional insured over work done for the business, the general liability insurance policy can address the claim. The additional insured can receive coverage for lawyers’ fees, court costs, and settlements or judgments.
Coverage for certain third-party lawsuits. An additional insured may be covered when sued over bodily injury, property damage, and advertising injury.
Who’s responsible for adding an additional insured?
Business owners can add an additional insured to their commercial general liability insurance policy. Independent contractors can also add business owners to their policy. So is the business owner or the subcontractor responsible for adding the additional insured? It depends largely on the scenario, and practices vary by industry.
Independent contractors typically have insurance obligations in their work contracts that they have to fulfill. These contract requirements will often state whether the company needs to be added as an additional insured.
Independent contractor insurance varies significantly across industries. Ask your Insureon agent about the cost and benefits of getting your own insurance coverage versus being added to your client’s policy.
Other types of small business insurance for independent contractors
In addition to commercial general liability insurance, independent contractors may need other types of small business insurance, including:
Commercial auto insurance
Every state requires this coverage for vehicles that are registered to a business, or the ability to compensate someone in case of an auto accident. In the event of an accident, an independent contractor’s commercial auto policy would cover the legal bills, medical expenses, and property damage.
For the self-employed and independent contractors, your personal auto insurance might not cover you when you drive your own vehicle for business use. If you drive your personal vehicle for work, you should consider hired and non-owned auto insurance (HNOA) to make sure you’re protected.
Commercial property insurance
Commercial property insurance offers financial protection for your workspace and its contents, and is often required by landlords to sign a lease. If you own or rent a workspace, or if you have expensive equipment, inventory, and other business assets, commercial property insurance would help pay for the repair or replacement if your business property is stolen, damaged, or destroyed.
Business owner’s policy
If you intend to buy both general liability and commercial property coverage, you can reduce your insurance costs by bundling them into a business owner’s policy (BOP). It combines both coverages under one policy, and usually has lower insurance premiums than buying each policy separately from the insurance company.
Errors and omissions insurance
Errors and omissions insurance, also known as E&O or professional liability insurance, can offset the cost of a lawsuit if a dissatisfied client sues you over your work. Those who offer professional advice and services buy this coverage in case a client accuses them of making a mistake, missing a deadline, or failing to deliver on a contract.
Workers’ compensation insurance
Workers’ compensation insurance covers medical costs and lost wages from work-related injuries and illnesses. It’s required in most states for businesses that have employees. Some independent contractors are required to have this coverage to work in riskier professions, such as roofing and building trades.
People who work for themselves and don’t have any employees generally aren’t required to have workers’ comp insurance, but it’s still a good idea to carry coverage. Health insurance can deny claims for work-related injuries, which means you could end up facing medical bills and lost income while unable to earn a living.
General Liability Insurance is a crucial aspect of protection for independent contractors. It helps mitigate the risks associated with potential lawsuits and damage claims that can arise from accidents or incidents during the course of work.
Choosing the right insurance provider is a critical decision that must be taken after careful consideration of various factors such as coverage limits, deductibles, and premium rates. It is essential to conduct proper research and seek professional advice to make an informed decision that best suits your business needs.
In conclusion, we strongly encourage independent contractors to take action and protect themselves with General Liability Insurance. It is a proactive step that can save you from unexpected financial burdens and legal disputes in the long run. Don’t let your hard work and dedication go to waste due to unforeseen circumstances – invest in General Liability Insurance today.