Independent Contractor Insurance: What It Is, How to Get It

Independent contractors aren’t immune to liability risks. If a company or client hires you as a 1099 worker to do a job and subsequently sues you — or if a third party sues the company and names you in the lawsuit — independent contractor insurance can help protect you. If you don’t have a formal business structure, that protection might be especially important, since your personal assets could be on the line as well.

You may also want small-business insurance policies that protect your property, your car and your income. Use this guide to understand what kind of coverage you need.

Independent contractor insurance protects 1099 workers against the risks that come with operating a business. It can refer to several types of business insurance, including policies that shield contractors from liability risks and those that help replace damaged property.

The specific type of insurance you should get depends on the type of contract work you perform. For example, a self-employed accountant should have errors and omissions insurance in case she makes a mistake that costs her customer money. A musician who uses his own instruments and sound equipment may need commercial property insurance that will pay out if his inventory is stolen, damaged or destroyed.

At a minimum, though, you should consider liability insurance. As a 1099 contractor, you can be held liable for harming another person or their property just as any small-business owner can be. Liability insurance can help protect against these risks.

Most businesses — includes independent contractors — should have general liability insurance coverage.

General liability insurance protects you if you’re accused of causing harm to a third party or their property. It can also protect you against claims of libel, slander and reputational harm.

If you clean homes and are accused of damaging someone’s furniture, for example, general liability insurance could help cover your legal costs.

In some cases, the company that hires you as a contractor may be able to add you to their general liability insurance policy. In others, they may require you to carry your own policy and ask to see a certificate of insurance before hiring you.

Professional liability insurance, also known as errors and omissions insurance, protects you if a client or customer accuses you of causing harm. If you’re a graphic designer, real estate agent or any other type of contractor who provides services, clients could sue you over inadequate performance.

This includes claims of:

• Mistakes or oversights in performing your service.

• Breach of contract.

• Professional negligence.

• Failure to deliver a service on time.

Depending on what kind of work you do, you may need additional types of business insurance beyond general and professional liability insurance.

You may be able to package several kinds of insurance into a business owner’s policy, or BOP. Business owner’s policies usually include general liability insurance, commercial property insurance and business interruption insurance.

Some providers offer additional customization options. For instance, State Farm allows you to add professional liability coverage to a BOP.

Follow these steps to shop for 1099 contractor insurance.

1. Weigh your risks. Think about the industry-specific risks you face. What types of lawsuits, accidents or disasters might impact you?

2. Decide what coverage you need. Your insurance coverage should protect you from the  risks you identified above.

3. See if you can add an endorsement to your homeowners policy. If you run a home-based business, you might be able to add an endorsement to your homeowners insurance policy to get some commercial coverage. Read your homeowners insurance policy carefully to see what coverage is available, and talk to your insurance provider if you have questions about whether the coverage is sufficient.

4. Decide how to shop. If your insurance needs are complex, you may want the dedicated support of an insurance broker. If not, try getting quotes online from several different providers, either by working with providers directly or by using an insurance marketplace.

5. Compare providers. Get insurance quotes from multiple providers before choosing one. Compare premium costs as well as policy limits, coverage details and provider reviews.

6. Buy your policies. After you choose a policy, make sure you know how to make payments and file claims if necessary.

If you’re shopping for independent contractor insurance on your own, several commercial insurance brokerages allow you to get a quote and make a purchase online.

• For quick coverage: Next Insurance lets you upload some basic information about your business, get a quote and make a purchase online within a few minutes. Next also publishes some general information about pricing, so you can get a sense of how much your coverage might cost. If you purchase a policy with Next, you’ll get an electronic certificate of insurance that you can share via email or text with anyone who asks to see it.

• For easy-to-customize policies: Chubb allows users to get quotes and purchase basic coverage, like general and professional liability insurance, online. Policies are customizable, and Chubb has received above-average marks for customer service in J.D. Power’s annual customer satisfaction surveys.

• For more personalized help: If your insurance needs are complex or you want hands-on support from an agent, consider calling your local State Farm office. The brokerage offers insurance packages for a variety of industries, and it allows customers to add professional liability coverage to a business owner’s policy. State Farm has been highly rated for customer satisfaction, too.