Many people opt to work under the status of an independent contractor, rather than an employee. Especially in today's professional landscape where job hopping and side gigs are more common than ever, working as a contractor makes sense for many workers. Independent contractors are defined as workers who are hired on a temporary basis. Contracts can be based on a period of time or a project but in general, an independent contractor is not an “employee” of the company they are hired for. Often times, independent contractors work for multiple companies on different projects and get paid on an hourly basis. While there are many pros to being an independent worker, one thing to consider is the need for your own insurance. The majority of companies' insurance excludes independent contractors, meaning if you are working on a contract basis, you will need to purchase policies for yourself. Insurance is a crucial aspect of any business, and this article will dive into what coverage you should consider as an independent contractor.
Just like any full-time employee, independent contractors are often at risk of injury and illness while performing job duties. Unfortunately, in most cases, independent workers are not covered by company workers comp coverage and therefore are not entitled to financial compensation in the event of an injury. Many high-risk industries like construction, energy, electricians, and various field workers have levels of independent contractors working on internal projects. In fact, many contracts actually require you to purchase your own worker's comp coverage in order to work. Even if your contract doesn’t require it, having insurance in place in case of an occurrence is crucial to the protection of yourself and your business. You can purchase a workers comp policy from any carrier that sells it, and many will be able to include it in a business insurance package. If you want to avoid private insurance, some states offer state-funded worker's compensation coverage. Your premium will be based on the type of work you do, if you have any employees, and your state-specific regulations.
Independent contractors have many of the same exposures and risks as larger companies and full-time employees, which is why you should consider General Liability Insurance. General liability is protection against third-party property damage or personal advertising injuries as a result of actions by you or an employee. General Liability will not only cover the cost to repair the damage in the event is found to be your fault, but will also pay the legal fees that were incurred as a result of the lawsuit. Lawsuits, whether valid or not, can be costly for even large businesses. Independent contractors likely have less financial support available to them, so a general liability policy is even more important to consider. These types of policies also cover slander and advertising injuries, which can be difficult to secure as a standalone. This is the type of coverage that should always be purchased by independent contractors.
It's become a stereotype that the one major downfall of being a contractor is the lack of health insurance. While it can feel like a long and challenging process, it's worth it. No matter where you are in the US, health insurance is expensive. While some states may provide stricter rules than others in terms of regulations, most independent contractors need to individually purchase some level of health coverage. When you get benefits as a traditional employee, some or all of your health insurance is usually covered. As an independent contractor, you will need to pay in full or out of pocket. The first step is to check if you qualify for your state-funded health insurance, which usually has lower premiums. However, if you make too much to qualify then you will need to go through private insurance. You can enroll during qualifying periods on your state's coverage portal, or reach out to private insurance directly. There are more options growing for self-employed workers and plenty of resources available to direct you to the right coverage options. Keep in mind that some states will actually fine you for having no coverage, or less than the required amount. Check your state's requirements before you purchase to be sure you’re compliant.
Professional liability coverage, otherwise known as E&O (errors and omissions) protects you against lawsuits as a direct result of your work in your line of profession. For example, if an accountant were to provide inaccurate financial advice to a client, their E&O coverage would cover the lawsuit. Professional Liability is important in protecting you in the event that the quality of your services is called into question. Most independent contractors could have potential scenarios when this coverage would be needed. Whether you work in marketing, as a doctor, as an interior designer, or in landscaping, there is always the risk of making mistakes on the job and a subsequent lawsuit. Investing in professional liability will give you protection, and ensure that if a claim does occur, it does not cause financial ruin for your business. Additionally, some clients and contracts require this coverage. Make sure you read through your obligations thoroughly and are compliant with all insurance needs.
If you’re an independent contractor unsure of your insurance requirements, ECBM can help. Our consultants understand the insurance needs of workers across a multitude of industries and will help simplify the process of protecting your business. Contact one of our agents for more information on coverage for independent contractors.