General Liability Insurance For Independent Contractors – Forbes AdvisorApril 29, 2021
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As an independent contractor, you may have a smaller business but it is still important to protect it with the right insurance.
Liability claims are expensive and one big one can crush a small business that doesn’t have insurance as a safety net. If you don’t have general liability insurance, you’ll need to pay for pricey claims against your business with your own money.
What Does Business Liability Insurance Cover?
General liability insurance covers:
- Property damage or bodily injury that your small business causes
- Reputational harm caused by slander or libel
- Advertising injury including copyright infringement
How Do Independent Contractors Get Commercial General Liability Insurance?
Commercial general liability insurance (CGL) is readily available from business insurance companies.
To prove to a client that you have insurance coverage, you’ll need to request a certificate of insurance from your insurance company. This is an official document that lists all the coverage types and limits on an insurance policy. Once you have the certificate of insurance, you can share it with your client and you’ll be ready to get to work.
Another option is for a client to add you to their own business liability policy as an “additional insured.” An additional insured is anyone in addition to the policyholder who is covered by an insurance policy. Being an additional insured means you’ll be covered by the client’s insurance for the duration of the job.
A client could even choose to add multiple independent contractors to a general liability policy but this would be costly. It is more cost-effective for the client for the independent contractor to have their own general liability insurance policy.
Having your own business liability insurance policy as an independent contractor allows you to take on jobs from a wide variety of clients. You have the necessary insurance and are ready for business.
What Types of Independent Contractors Need Business Liability Insurance?
Here is a roundup of the types of independent contractors who would benefit from general liability insurance:
- Independent construction contractors
- House and carpet cleaners
- Freelance writers and editors
- Freelance photographers
- Graphic designers
- Independent hair stylists and salon professionals
- Independent business consultants
- Independent PR consultants
- Independent marketing consultants
General Liability Insurance for Independent Construction Contractors
Most independent contractors in the construction industry need general liability insurance. Without it, they won’t be able to get construction jobs. Many clients require construction contractors to have general liability insurance before agreeing to do business.
The state may require it as well. State regulators sometimes require independent construction contractors to carry general liability insurance.
Construction workers visit job sites and interact with clients in person, so business liability insurance is a good fit for independent construction workers. You want your business protected in those situations.
How Much Does General Liability Insurance for an Independent Contractor Cost?
The cost of general liability insurance depends on several factors including the risk exposure for your business, your business location, your length of time as a business and the policy details that you choose such as coverage limits and deductible amount.
Check prices for general liability insurance online or with a local business insurance agency. It’s wise to shop around for general liability insurance quotes from several insurance companies to get the best deal.
How much does general liability cost? General liability insurance costs an average of $42 a month, according to Insureon. The average cost of a slip and fall accident is $20,000, according to The Hartford. Paying that amount out of your own pocket could topple your business. Having business liability insurance protects your business from this and other liability claims.
For their general liability insurance coverage, most small business owners will choose a standard $1 million per occurrence and $2 million aggregate policy limit for their policy, according to Insureon. This type of policy pays up to $1 million to cover a single general liability insurance claim and has a $2 million limit for the policy period. The policy period for this type of policy is usually one year.
Other Types of Insurance for Independent Contractors
In addition to general liability insurance, independent contractors may want to consider these other business insurance types:
Commercial auto insurance is essential if you own your car and use it for business. This type of coverage will pay claims if you get in an accident when driving for business. Hired and non-owned auto coverage will cover you if you are renting a car that you drive for work or if you are using your personal car for work purposes.
Workers compensation provides benefits to employees who suffer an injury or illness due to work. It’s required in most states. If you have even one employee you’ll need to purchase workers comp.
Professional liability insurance pays claims if you made professional mistakes in your business services. Professional liability insurance is also called errors and omissions insurance. The cost of professional liability insurance depends on the risk level associated with your business.
Business income insurance helps you recover lost income. If you are ever unable to open your business because of a loss covered by the policy (such as a fire), this reimburses you. Business income insurance is also known as business interruption insurance.
Commercial property insurance covers tools and other equipment that you need for the business and this includes owned and rented materials. Commercial property coverage also protects your office space whether it is owned or rented.
Cyber liability insurance pays out if a customer’s personal information, such as credit card data, is stolen. Independent contractors who accept credit cards may want to get cyber liability insurance in case of data breaches. Cyber liability insurance protects your private business information as well.