Independent Contractors Insurance

What Does Independent Contractors Insurance Mean?

Independent contractors insurance is a policy designed for individuals who work for a person or entity but are not classified as employees. This type of insurance is often required by businesses when hiring third parties, as it helps absolve the hiring party of future liability, transferring the responsibility to the independent contractor instead.

Insuranceopedia Explains Independent Contractors Insurance

It can be difficult to distinguish between an independent contractor and an employee, but when it comes to insurance, the difference is clearer. Independent contractors are not entitled to worker’s compensation, which is a benefit typically available to employees.

Since independent contractors don’t receive worker’s compensation, they are required to obtain their own insurance, and in some cases, this may be mandated by law before they begin working. What an independent contractor actually needs depends on their trade and the companies they work with, and most end up combining several policy types into a single independent contractor business insurance setup.

Additionally, independent contractors may need liability insurance to cover legal expenses in the event of a legal complaint regarding the work they have performed. For most contractors, the baseline policy is general liability insurance, which pays for third-party bodily injury and property damage claims that come up during a job. Contractors whose work involves giving advice or providing a professional service often add professional liability insurance on top of that to handle claims that a client suffered financial harm because of a mistake.