An independent contractor chooses their own projects, determines their own working hours, creates their own pay scale, and acts as their own boss. Even with so many upsides of working as an independent contractor, there are some downsides that can end up costing hundreds and thousands of dollars — the biggest downside being a lawsuit.
So, how do independent contractors protect themselves from probable lawsuits? An independent contractor can protect him or herself with independent contractor insurance!
Who Falls into the Category of Independent Contractors?
The following professionals fall into the category of independent contractors:
- Independent Construction Contractors
- Repair Professionals
- House and Carpet Cleaners
- Freelance Writers
- Freelance Graphic Designers
- Freelance Editors
- Independent Hair Stylists and Salon Professionals
- Animals Trainers such as Dog or Horse Trainers
The Importance of Obtaining Independent Contractor Insurance
We already know that one of the biggest benefits of obtaining independent contractor insurance is that it prevents significant financial losses from lawsuits. BUT! Independent contractor insurance alone cannot provide you with the maximum protection you need to stay clear of trouble.
On top of the basic coverage for independent contractors, you can also opt-in to liability insurance, which covers bodily injuries and property damage, completed operations and products, advertising personal injury, and contract liability.
- Bodily injury occurs when an injury or death occurs due to either you or your worker’s action. It will cover the medical fees and legal expenses in the event the injured person or late person’s relative sues you.
- Property damage occurs when you or your worker causes damage to someone’s property such as the property you were working on or to any other property for that matter.
- Completed operations and products offers coverage in the event a completed project or product you sell or distribute encounters a problem or causes damage.
- Advertising personal injury covers the risk of causing damage to another person’s reputation or causing a loss due to libel, slander, or false advertising claims.
- Contract liability covers you in the event of dispute resulting from a contract. *Note: Contract liability coverage is not always part of the general liability coverage so inquire with your insurance company beforehand if you want this insurance coverage to be part of your policy.
How Do You Determine You Need Independent Contractor Insurance?
If you are starting your career as an independent contractor or you are an independent contractor, but still do not have the proper insurance coverage needed, you need to get one if the following reasons apply to you:
- You handle and move heavy equipment around the property of your customers
- You offer contracting work to locations where the risk of interruptions can occur, resulting in you having to stop work until the interruption has cleared such as bad weather
- You perform subcontracting work that requires you to obtain a Certificate of Insurance
- You frequently have customers who visit your property or any other premises that you are using as your office
If That is the Case, Why Do Some Independent Contractors Dismiss the Need for Insurance Coverage?
Independent contractors who want to cut costs and save money tend to dismiss the need for insurance coverage. What they fail to realize is that the cost of solving a moderate issue such as a contract dispute can cost them a lot of money without insurance. In fact, without insurance, the costs of settling a contract dispute can cost them more than the cost of their insurance premiums.
For this reason, independent contractors should apply for insurance coverage. Protecting yourself and your business is not the only reason to have independent contractor insurance, but some of your clients may also require you to have a certain level of insurance coverage.
Why Do Clients Require You to Have Independent Contractor Insurance?
Clients are employing the service of an independent contractor. They are placing their project, whether it is a small-scale or large-scale project, in your hands. They are trusting you to ensure everything goes smoothly, from beginning to end.
They do not want to deal with mishaps, as much as you do not want to deal with potential lawsuits that may come your way as a result of those mishaps. Therefore, you need to take steps to mitigate the risk by obtaining independent contractor insurance.
FINAL THOUGHT… If You Want to Continue Working as an Independent Contractor, You Should Obtain Insurance
Independent contractors are in high demand among businesses who seek their services due to a variety of factors such as financial savings, less equipment, less office space, no training required, and freedom with who they hire.
- Financial savings help businesses save money because even though they are paying more for the services of an independent contractor, they are not on their payroll.
- Less equipment means that independent contractors bring with their own equipment.
- Less office space means they work from their home or own office, thus saving businesses money on getting a separate office space for them.
- No training required means that independent contractors are experts in their area and businesses will not have to spend money on training them.
- Freedom with who they hire means that businesses will not have to open a position for a job that will take six months to complete, but instead, hire an independent contractor who will leave once the job is done.
If an independent contractor works for businesses, they should obtain independent contractor insurance because if something goes wrong, they will be looking at a lot of legal costs and expenses in the event the business sues them.
Independent contractors, depending on the industry they work in, may find themselves working on one job for six months up to a year. If another client sues them in the meantime, they might not have sufficient revenue to pay for the lawsuits. If they have insurance contractor insurance, they do not have to worry about spending money out of their own pockets to pay for the legal fees, as their insurance coverage will do it on their behalf.
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