An independent contractor is either an individual, professional, or a business that does not report to just one company. Independent contractors have the freedom and flexibility to take on paid contract work from various clients and companies.
Examples of independent contractors include the following:
- Window and door installers;
- Concrete contractors;
- Engineers and architects;
- Legal consultants;
- Marketing consultants;
- House cleaners;
- Lawn care specialists;
- Personal chefs;
- Photographers; and
No matter what industry an independent contractor is from, they face unique risks that only the right independent contractor insurance can cover. This article will tell you everything you need about this type of insurance. We will discuss the following points:
- What is Independent Contractor Insurance?
- Do I Need Insurance as an Independent Contractor?
- Why Independent Contractor Liability Insurance Is a Must
- Other Types of Independent Contractor Insurance
- How Insurance Bundles Can Save You Money
Let’s get started!
1. What is Independent Contractor Insurance?
Independent contractor insurance is a specialized type of insurance for independent contractors. It goes beyond CGL or independent contractor liability insurance. This insurance plan can also be tailor-fit to the unique risk profile of the independent contractor.
Working as an independent contractor comes with many perks, such as more freedom and better work-life balance. Hence, it’s not surprising that there are about 3.11 million self-employed individuals across Canada—which is nearly 10% of the country’s current population
However, a few disadvantages exist in operating as an independent contractor. The biggest one is the possibility of bearing losses and sudden expenses alone. These can come from accidents, theft, property damage, etc.
The role of insurance for independent contractors is to prevent such losses and help keep your business running no matter what.
2. Do I Need Insurance as an Independent Contractor?
If you’re still wondering if you need independent contractor insurance, try answering these questions below:
- Do you provide consultation for high-stakes projects that deal with finance, marketing, construction, etc.?
- Do you handle any projects where your mistakes can lead to injury or property damage?
- Does your business entertain clients in a physical office?
- Do you work with high-powered equipment, dangerous chemicals, and heavy materials?
- Do you do any repair, maintenance, or construction work?
- Do you go into clients’ homes to perform a service or deliver a product?
- Do your operations involve dealing with the dangers of electricity in your day-to-day tasks?
- Do you create and/or sell any products?
- Do you work with hair or skin in a way that can lead to chemical or physical injury?
- Do you prepare food and beverages?
If you answered “yes” to two or more of the above questions, independent contractor insurance is highly recommended.
Now that we’ve covered the basics, let’s move on to the details of insurance for independent contractors.
3. Insurance Coverage From Clients is Not Guaranteed
Even if you are hired contractually by larger businesses, there’s little to no chance they’ll get insurance on your behalf. This is because having an additional insured will result in an increased premium.
Furthermore, even if you are included in the insurance plan of a company that hired you, there may be exclusions in place that will limit your coverage.
With independent contractor insurance, you can be certain you are insured at all times. You also get full control over the scope of your insurance.
4. Independent Contractor Liability Insurance Is a Must
Independent contractors, small businesses, and larger companies all bear the same legal obligations and liabilities. For example, as an independent contractor, you can be held legally responsible for damages such as the following:
- Bodily injury inflicted on a third-party individual (e.g. customers or clients);
- Third-party property damage while providing services;
- Third-party property damage or injuries because of defective work (e.g. a faulty plumbing repair leading to water damage); and
- Reputational/advertising injuries (e.g. copyright infringement, slander, or libel).
All of the above examples can lead to costly lawsuits and settlements. Ultimately, you will still need to defend yourself whether or not damages are ruled as your legal responsibility. This alone can quickly result in large expenses. To give you an idea, the average cost of hiring a lawyer in Canada is $150 - $500 per hour—and a lawsuit can take as short as a few months or as long as several years to settle.
For this reason, even independent contractors are advised to get independent contractor liability insurance (a.k.a. commercial general liability insurance) for their business or practice. CGL insurance for independent contractors will cover the following expenses related to third-party damages:
- Legal fees;
- Medical fees; and
- Repair/replacement fees.
5. There Are Different Types of Independent Contractor Insurance
We can look at commercial general liability insurance as the foundation. However, other types of insurance for independent contractors can improve your scope of coverage. Here are some examples.
a. Professional Liability Insurance (Errors & Omissions Insurance)
As an independent contractor, whether or not you are a licensed professional, it pays to have this type of insurance if you are open to the risks of getting sued for negligence and errors. This is a must for nurses, personal support workers, architects, accountants, plumbers, electricians, and other self-employed professionals.
b. Home-Based Business Insurance Plan
You can think of this type of insurance as “commercial property insurance” for home-based businesses. This insurance policy covers office equipment and any inventory you may have as an independent contractor. It also covers lost income due to business interruption if incidents such as theft, vandalism, or any other covered damages occur.
c. Tools and Equipment Insurance
If you are an independent contractor who depends on high-powered tools and machinery for your business, this type of insurance is for you. It’s an insurance policy that covers you in the event that your tools and equipment are lost, stolen, or damaged. The coverage can even be extended to borrowed, rented, and leased tools and equipment.
d. Vehicle Insurance
If your business relies on vehicles for transportation, moving equipment, and other commercial purposes, standard auto insurance may not be enough. Hence, it’s important to ensure that your car insurance covers business activities. Typically, this means that you need to upgrade to commercial auto insurance.
6. The Value of Having a Certificate of Insurance for Independent Contractors
Oftentimes, the landscape is highly competitive for independent contractors. Securing client trust and preference is vital. Having a certificate of insurance for independent contractors can help. By presenting your own certificate of insurance, you assure your client that (1) you are covered for any relevant risks, and (2) that you do not need them to have you as an additional insured.
7. Insurance Bundles Can Save You Money
Though having complete coverage may seem like an added expense, it can save you from higher costs when faced with theft, accidents, third-party injuries, and so on. Furthermore, experienced insurance brokers can put together cost-effective insurance bundles that come with great discounts.
Personalized Independent Contractor Insurance in Ontario
Identifying your risks as an independent contractor can be overwhelming, but it isn’t something you need to face alone. Our experts at KASE Insurance can help you gain more insight on this topic and customize a comprehensive insurance bundle that fits your needs to a tee. In addition, our insurance experts can ensure that your plans don’t contain any unnecessary riders—saving you money while getting the most benefits out of your coverage.
Want to know more about insurance for independent contractors like you? Contact our team today!