Contractor Insurance – What You Need

As an independent contractor, you may be wondering what kind of insurance you need to protect yourself financially. The answer will depend on the type of work you do – for example, whether you work at a desk performing data entry or digital marketing services, you work on other people’s property providing home maintenance, or you offer construction services.

Top Coverage Considerations for Independent Contractors

  • Errors and omissions: Contractors who provide consulting and advice, such as accountants, financial planners, engineers, interior designers and architects, need to be concerned about liability risks due to losses a client may experience as a result of the contractor’s recommendations or professional guidance.
  • Bodily injury and property damage: Contractors who work with heavy machinery and tools, such as plumbers, re-modelers and electricians, need to be concerned with mishaps due to hazards such as power tools, defective machinery and compressed gas.
  • Product and liquor liabilities: Independent contractors who serve food and alcohol at functions need to be concerned with potential injuries and illnesses due to food and alcohol served.
  • Medical and disability: As a contractor, you are most likely not on a group plan to cover your own injuries, which can leave you exposed to a loss of income risk if you become ill or injured.

Who Needs Contractors Insurance?

There are many types of independent contractors who all need independent contractors liability insurance and other coverage to match their specific risks. Some of the professionals that need contractors insurance include:

  • Independent construction contractors
  • Plumbers, carpenters, electricians and painters
  • Repair people
  • House and carpet cleaners
  • Freelance writers, editors and graphic designers
  • Independent hair stylists, and salon professionals
  • Horse or dog trainers

Do You Need a Business Owners Policy?

The contractors general liability coverages can often be bundled with a few other coverages to create a business owners policy, or BOP. This serves two purposes. It expands the policy to cover risks that small business owners face, and also typically results in a discount on the cost of your insurance.

Normally, this coverage will make sense for you if you have employees. A small business is basically defined as a business that has up to 100 employees and generates about $5 million or less in annual revenues.

Some of the additional coverages that can typically be bundled with a BOP include:

  • Property damage: This insurance covers your owned or rented property if it is damaged. This includes office buildings, storage facilities, warehouses, workshops, or garages. It does not cover commercial vehicles.
  • Business income: This protects you from loss of income if your business is interrupted due to a covered loss. It usually covers income and operating expenses for up to 12 months.
  • Commercial vehicle: Insures your cars, trucks, vans, specialized trucks or any vehicles used for business purposes.

Should You Consider Professional Liability Coverage?

When you are looking for the right contractors insurance for your business, you will have many choices, including whether to buy professional liability insurance, also known as “errors and omission” insurance or “E & O.”

E & O is a liability policy that protects you if you make a mistake that causes a financial loss to a client. Similar to general liability, it will provide legal defense and claims settlements, if necessary.

You may want or need this coverage under the following circumstances:

  • You provide professional advice in your line of work. This can include everything from recommending a particular type of plumbing or wiring to providing interior design services.
  • You hire employees or subcontractors who provide any sort of advice or consulting services.
  • Your state requires you to have E & O insurance due to the work you perform.

If you utilize subcontractors, it is a good idea to make certain they are insured with professional liability as well, as they might not be covered by your policy.

For more information about our firm and the services we offer, send us a quick email or call our office. We welcome the opportunity to speak with you.

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