There are many benefits to working as an independent contractor. Often, you’re able to set your own work hours, schedule, and vacation days. You can choose your clients based on who you want to work with, and you never have to worry about being fired.

However, along with all the many wonderful freedoms independent contracting gives you, there are also a few key drawbacks among which is the requirement for each independent contractor to purchase their own insurance options.

To better understand this requirement, let’s look more closely at what exactly an independent contractor is, why they need insurance, and what specific insurance types they may require.

What is an Independent Contractor?

Unlike other employees, independent contractors–sometimes known as freelancers– are professionals who work for themselves. All of their earnings–and all of the risk–associated with their work becomes their full responsibility where employees of businesses have both of those factors overseen by their employer. Independent contractors also have full freedom in how they perform their work, making sure they pay their full share of taxes, and providing their own insurance options. 

There are a few specific job types that typically fall under the definition of “independent contractor,” depending on how their unique services are offered to clients, customers, and peers. These can include:

  • Doctors and dentists with private practices
  • Veterinarians
  • Lawyers
  • Accountants
  • Contractors and subcontractors
  • Public stenographers
  • Auctioneers
  • Writers
  • Graphic designers
  • Artists
  • Tradesmen and craftsmen

Note that while all of these positions are commonly found among independent contractors, each one may also be held by an employed individual and may be subject to a company’s internal insurance requirements and stipulations.

Why Do Independent Contractors Need Insurance?

While employees can enjoy the protections offered by their employers in case something goes wrong, independent contractors do not have that same luxury.

If an employee makes a mistake on the job and it results in claims of negligence or other damages by a third party, the company’s insurance policy can step in to cover the costs of the damages. However, independent contractors must face all of the liabilities, risks, and potential damages associated with their work solely on their own. 

This is why independent contractors must have the right insurance policy options in place. Otherwise, they may be forced to pay costly lawsuits and damages out of pocket.

What Insurance Requirements Do Independent Contractors Need?

While there are many excellent insurance options for independent contractors, there are a few key policy options that you must purchase to have the best protection possible for your field. Among these are general liability insurance, professional liability insurance, cybersecurity insurance, and personal insurance.

General Liability Insurance

General liability insurance is the best cover-all insurance type for independent contractors. It protects you against many common workplace accidents, risks, and damages including property damage, third-party injuries, and common accidents. General liability insurance can also cover libel, slander, and infringements on trademarks and copyright.

For freelancers and independent contractors specifically, this insurance works for freelancers if they use photographs or copyrighted material from an outside source or if they publicly comment negatively on a competitor’s content.

Professional Liability Insurance

While general liability insurance provides protection against common accidents and damages, professional liability insurance–also known as errors and omissions insurance–covers expenses relating to legal expenses. These can include legal bills for lawsuits and other claims relating to professional services.

For independent contractors, this can include coverage for items such as delivering late or incomplete work, mistakes in the work completed, or any job-related negligence.

Cybersecurity Insurance

In this digital age, cybersecurity insurance is especially important. It provides protection against incidents and damages relating to online activity. These can include online threats, data breaches, ransomware attacks, and the theft of sensitive information. 

For freelancers and independent contractors, this can look like insurance helping to cover expenses relating to notifying customers of their information being leaked, forensic services to help determine the cause of the breach, legal services relating to the incident, and credit fraud monitoring services.

Personal Insurance

If you work for an employer, especially in a full-time capacity, you don’t have to worry about purchasing personal insurance because it’s provided through your employer. But unfortunately for independent contractors, you’re entirely responsible for purchasing your own personal insurance options.

The most popular personal insurance coverage options include life insurance, health insurance, disability insurance, homeowners or renters insurance, and auto insurance. 

Life Insurance

Life insurance policies work by providing payments and beneficiaries to your dependents in case of your death. The amount of financial assistance granted will depend on how big your insurance policy is, but the money can be used for virtually any purpose once it’s granted including funeral expenses, mortgage payments, and others.

Health Insurance

Health insurance works to offset the expenses related to the costs of medical care. This can include coverage for prescriptions, emergency room visits, urgent care visits, basic check-ups, and more.

Disability Insurance

If you’ve ever been put out of work due to a disability, whether it was caused by a work-related accident, illness, or something else, disability insurance can step in to help cover certain costs and can be used to recover a portion of your typical salary so that you and your family still have an income while you’re recovering.

Homeowner’s or Renter’s Insurance

If you’re an independent contractor who works from home, your homeowners or renter’s insurance policies may be able to offset costs relating to damages on your property or to your personal belongings. This will entirely depend on the kind of insurance you have, so make sure to discuss all of your specific coverage needs with your agent before choosing a policy.

Auto Insurance

An auto insurance policy is helpful for a number of reasons. It can help offset costs relating to accidents that happen to your vehicle or that you may cause to other vehicles. Additionally, it can help cover medical expenses relating to the accident. If you use your car for work at all, a simple auto policy can provide you with coverage if you’re ever involved in an accident.