Top Insurance Needs for Independent Contractors

Here’s the good news: As an independent contractor, you’re your own boss. However, the bad news is that as an independent contractor, you’re your own boss. Don’t get us wrong. There are tons of benefits to becoming an independent contractor. 

But if you aren’t ready to truly seize the reins and make all of the decisions, you could end up not being as covered as you were as an employee. 

Previously, your employer made plenty of decisions on your behalf, including making sure you did not risk any personal liability from your day-to-day job duties. When you decide to go out on your own, it’s up to you to manage your insurance needs. 

For example, car insurance for independent contractors comes into play when you use your own vehicle for commercial purposes. Your personal car insurance policy won’t cover business-related activities such as delivering packages or even transporting passengers. 

Managing Your Insurance Needs

It’s up to you to make sure you are doing enough research to avoid vulnerabilities. Not having insurance coverage kick in during a car accident or within a business can become quite costly. 

Given how easy it is to search online for car insurance, you owe it to yourself to ensure you’re getting the right coverage as soon as possible. This is also the case for professional liability insurance, which is tailored to fit your business. For example, if you are just starting to create blog content and get it off the ground, you need insurance.

Professional liability comes into play when others raise claims of negligence. You may assume you don’t need this coverage because you don’t deal with an industry known for high errors, but that is not the case. 

Every working independent contractor should get professional liability insurance. It’s often called errors and omissions insurance, and people have a long time to sue you if they feel you’ve made a mistake. 

Does homeowners insurance cover professional liability?

If you’re working out of your home like many independent contractors, you may assume your homeowner’s insurance has room for this type of coverage. Unfortunately, protection from professional liability isn’t part of homeowner’s insurance, not even by endorsement. 

You owe it to yourself to purchase a separate policy that covers the exact risks your particular line of work involves. 

Talking to an Agent About Professional Liability

While you can shop online for all types of insurance, we believe there are some types of insurance where you are better off talking directly to an agent. Whether you call professional liability insurance errors and omissions or negligence coverage, the reality is that you need to talk to an agent. 

They are well versed in coverage exclusions as well as helping you determine how much coverage you need. 

Keep in mind no policy is designed to pay out an unlimited amount of money. It isn’t just about the payouts involved in defending you. If someone raises a suit against you, your professional liability coverage can cover your legal costs. 

The company will have its own attorneys defend you. You will not have to try to find and pay for an attorney on your own. 

Estimating Your Car Insurance Needs

Car insurance should remain top of mind for a couple of reasons. First, your chances of getting into a car accident are present every time you put the key in your car’s ignition. Even if you consider yourself a conscientious and safe driver, it doesn’t mean you’re immune to accidents. 

Give yourself a chance to get good car insurance coverage. Also, if you’re working out of your car and have commercial signage of any kind on your vehicle, be prepared for people to seek damages. While this isn’t automatically the case, some people tend to be contentious when they realize you’re a business and not just a regular person. 

This is not a time when you want to stick with basic state minimums for your car insurance. You want to look at not just the cost of getting someone’s vehicle repaired but also the potential for more expensive equipment to become damaged in the event of an accident. 

The Dangers of Car Insurance Limits That Are Too Low

Car insurance is divided into two main sections: coverage for you and your passengers as well as coverage for other parties. If you are in an accident that is deemed your fault, the portion of your car insurance devoted to taking care of the parties you hit kicks in. 

So let’s say you get into a car accident and because of that accident, a telephone pole and a few street signs are damaged. 

If the accident is deemed your fault, you will not only be responsible for damage to the other person’s vehicle and covering any injuries related to that accident, but you are also responsible for the telephone pole and street signs.

If you only have coverage up to $25,000 in the event of an accident, you are underinsured with respect to this accident. The telephone pole alone can be well over that amount when materials, labor, and other associated costs are calculated. 

You could end up being responsible for the extra cost if the other party decides they are not willing to settle for your insurance company’s limits. 

Don’t Forget Your Own Vehicle Coverage

In the above example, we’re only talking about coverage for other parties. You still want to have coverage within your insurance policy for damage to your vehicle. Collision and comprehensive coverage is available regardless of whether the accident is your fault. 

While collision coverage handles damage to your vehicle if you strike another vehicle or even a wall, comprehensive coverage handles all of the other hazards you may run into, such as fire, vandalism, flood, animals, and theft. 

Be Mindful of What You Can Afford Regularly 

Like with any other service, insurance only works if it’s active. You have to get coverage you can afford. In the case of professional liability insurance, it works on a “claims first” basis. This means that for them to begin defending you, there has to be an active policy in place when the claim is filed.  

Car insurance works in a similar way. If you don’t have active coverage at the time of the accident, the insurance company will not cover your vehicle or the other party’s vehicle. 

Good Insurance Decisions Help You Build and Maintain Your Business

Independent contractors have very thrilling journeys ahead of them. While it is indeed true that they have so much responsibility, they also have plenty of freedom. Take this as a challenge to build the life you’ve always wanted, rather than just worrying about insurance. 

Keep in mind that insurance is designed as a tool to protect you and all of your hard work. You have a bright future ahead of you with a lot to learn as a business owner.  As long as you follow the points here in this guide as you seek insurance, you will find coverage that is as unique as your approach to the independent contractor lifestyle.

Luke Williams writes and researches for the car insurance site, His passions include best practices for insurance and other ways the self-employed can smartly grow their businesses.

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