Contractor Insurance: Getting Covered As A 1099 Worker

As a 1099 contractor, you are considered an independent contractor and are responsible for your insurance coverage. While it is not always required by law, having insurance is essential to protect yourself and your business from financial risks and legal issues. Without insurance, you could be held liable for accidents, property damage, reputational harm, and other issues that may arise in the course of your work. Obtaining appropriate insurance coverage ensures that you are protected financially and legally in case of any unforeseen events or claims against you.

General liability insurance

As a 1099 contractor, it is important to have the right insurance protection. You can get sued just as easily as any other small business owner, and liability claims can be expensive. If you don't have coverage and a client sues you, you will have to pay the costs out of pocket, which could potentially close your business.

GLI can also protect you against claims of libel, slander, and reputational harm. For example, if you are a cleaner and are accused of damaging someone's furniture, GLI could help cover your legal costs.

You may also need GLI to comply with your clients' contractual requirements.

There are two ways to get GLI:

• From your client: Your clients can add you to their general liability insurance policy as an additional insured. This covers you while you are doing the job, but it can be more expensive for your clients.
• From an insurance provider: Getting your own coverage is typically more cost-effective for your clients. Ask for a certificate of liability insurance so you have proof of coverage.

The cost of GLI depends on factors such as your coverage limits and deductible amount. It is a good idea to work with a local insurance agency or get quotes from different insurance companies to find the right policy for your business.

Errors and omissions insurance

As a 1099 contractor, you face the same risk of being sued by a client as any small business owner. If a client sues you, you will have to pay the costs out of pocket unless you have the right insurance protection. E&O insurance can provide this protection, covering both the cost of your legal defence and any damages awarded.

For example, if a client is unhappy with the work of a marketing consultant and sues them, their E&O insurance can cover the legal defence and damages. Similarly, if an accountant makes a mistake that harms a business, their E&O insurance can cover the legal fees and damages.

E&O insurance is not usually required by law for independent contractors, but some states mandate it for certain professions, such as real estate agents and brokers. Additionally, clients may require you to have E&O insurance before signing a contract.

The average cost of E&O insurance for independent contractors is $59-$61 per month, depending on factors such as profession, coverage limits, and deductible.

Commercial auto insurance

As a 1099 contractor, it is important to have the right insurance protection. You can get sued just as easily as any other small business owner, and liability claims can be very expensive. If you don't have coverage and a client or customer sues you, you will have to pay the costs out of pocket, which could be enough to close your business.

• Auto accident injuries
• Property damage caused by your vehicle
• Vehicle theft and vandalism

If you have a business vehicle, then you need commercial auto insurance. Every state requires this coverage for vehicles registered to a business. In the event of an accident, your commercial auto policy would cover the legal bills, medical expenses, and property damage.

If you drive your personal vehicle for work, you should consider hired and non-owned auto insurance (HNOA) to make sure you are protected. HNOA offers liability protection for independent contractors when they use their own car or a leased or rented vehicle for work. It covers you during work-related errands, such as making deliveries, picking up supplies, or visiting clients. If you get into an accident, it will pay your legal costs, along with any judgments or settlements.

A commercial auto insurance premium can cost up to $150 per month, depending on the industry you work within and your coverage needs.

Workers' compensation insurance

As a 1099 contractor, you are not legally required to have workers' compensation insurance if you have no employees working under you. However, it is beneficial to have this type of insurance to protect yourself from work-related injuries or illnesses.

Additionally, some companies may require their contractors to have workers' compensation insurance. This is because, in many situations, the company is responsible for paying workers' compensation claims made by injured independent contractors. By requiring contractors to have their own insurance, companies can reduce their own financial risk and liability.

Furthermore, workers' compensation insurance can provide liability protection for small business owners. If an injured worker sues their employer over a workplace injury or illness, the claim and lawsuit would be covered by the employer's workers' compensation policy.

While it is not a legal requirement for 1099 contractors with no employees, workers' compensation insurance can provide valuable financial protection and help you meet the requirements of potential clients.

Commercial property insurance

As a 1099 contractor, it is important to have the right insurance protection. You can get sued just as easily as any other small business owner, and liability claims can be very expensive. If you don't have coverage and a client or customer sues you, you'll have to pay the costs out of pocket, which could be enough to close your business.

A BOP typically includes general liability coverage and commercial property insurance at a discounted rate. It protects against the most common lawsuits and business property damage, including slip-and-fall injuries, accidents that damage client property, and stolen or damaged business property.

In addition to commercial property insurance, there are several other types of insurance that 1099 contractors may want to consider, including:

• General liability insurance
• Professional liability insurance (also known as errors and omissions insurance)
• Workers' compensation insurance
• Cyber insurance
• Commercial auto insurance
• Fidelity bonds

Frequently asked questions