Liability Insurance for Independent Contractors: What You Need to Know

What is general liability insurance?

No matter the type of business you run, experts recommend carrying general liability insurance. This covers you when it comes to common business risks, like a client getting hurt or their property being damaged. 

What is included in a liability policy?

Some of the things that a general liability insurance policy might cover include:

• Bodily injury
• Property damage
• Medical expenses
• Libel or slander

What kind of contractors need liability insurance?

Independent contractors who should consider purchasing general liability coverage include:

• Construction contractors
• Plumbers
• Electricians
• Painters
• Carpenters
• Independent hairstylists and beauty professionals

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How do you get liability insurance?

There are two ways to get general liability insurance: 

• From an insurance provider
• From your client

Most independent contractors opt for a general liability policy from an insurance provider. Advertising that you're fully insured — and can show proof of insurance — is good for business.

If a client already has general liability insurance, they can add you to their policy as an additional insured. But this option probably only works for long-term clients, since it places the expense on clients. Also, this insurance usually only covers your work with that particular client.

How much liability insurance do you need?

Once you’ve decided to buy general liability insurance, the next step is deciding how much coverage you need. 

You’ll need to decide on two different coverage limits:

• Per occurrence: The limit your insurance company will pay each time you file a claim
• In aggregate: The amount your insurance company will pay per year)

Liability insurance policies tend to have a $1 million coverage limit per occurrence limit and a $2 million aggregate limit.

For many businesses, these default coverage limits are more than enough. But if you know that you need extra coverage, most insurers allow you to increase your coverage limits. 

Just keep in mind that the higher your coverage limits are, the higher your monthly premiums are likely to be.

How much does liability insurance cost?

Based on our research, liability insurance costs somewhere between $30 and $50 per month on average. The exact cost will depend on:

• The specifics of your work
• Your insurer
• How much coverage you need 

This may seem like an unnecessary monthly expense, but it could potentially save you thousands of dollars if something happens to a customer or their property.

Like any type of insurance, while you hope you’ll never need to use it, it’s important to have it in order to protect yourself and your business.

Can you deduct liability insurance from your taxes?

Yes! Since liability insurance protects your small business or side hustle from financial risk, it’s 100% tax-deductible. It’s one of many expenses you can deduct as an independent contractor. Other types of business insurance, like builder’s risk, also count.

You’ll deduct qualifying insurance costs on line 15 of your Schedule C. 

Keeper can help you automatically deduct what spend on your general liability policy — and any other business insurance policies you pay for. That’s one less thing for you to worry about, so you can focus on keeping your clients happy.

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The best places to buy general liability insurance

If you’re looking to purchase general liability insurance, there are plenty of options available. Some come from insurers that cater specifically to gig workers and side hustlers, while others offer coverage for small and medium-sized businesses. 

When purchasing a business insurance policy, it’s a good idea to shop around and get quotes from multiple providers in order to ensure you’re getting the best deal. We’ve rounded up a few insurers worth considering if you’re looking for a liability insurance policy.

Thimble: Best for easy online application

Cost:  $42 per month

Thimble specializes in business insurance, with a particular emphasis on flexible insurance for people with side hustles or small businesses. 

You can change, pause, or cancel your plan as needed, which makes it a great fit for entrepreneurs who have seasonal businesses or who only need occasional insurance coverage for events.

In addition to liability insurance, Thimble also offers:

• Professional liability insurance (also known as errors and omissions insurance)
• Commercial property insurance
• Business equipment protection insurance

… and more.

Hiscox: Best for business insurance options

Cost: $30 per month

Hiscox is another insurer that offers general liability insurance. In business since 1901, it’s a good option if you’re looking for an established insurer with a track record of success.

Hiscox also offers a variety of other types of business insurance, including: 

• Errors and omissions insurance
• Professional liability insurance
• Short-term liability insurance
• Cybersecurity insurance
• Medical malpractice insurance
• Workers’ compensation

… and more.

If you know you need several types of overlapping business insurance coverage, Hiscox could be a good fit. One reason bundle multiple policy types? You can sometimes get a discount.

NEXT insurance: Best for small businesses

Cost: $45 per month

NEXT Insurance is another option for an independent contractor insurance policy. They focus on self-employed workers and small business owners, issuing policies for everyone from personal trainers to real estate agents, carpenters to accountants — and plenty of other gig workers and entrepreneurs. 

Customers can get a discount if they choose to bundle general liability insurance with another policy, like professional liability insurance or commercial auto insurance. NEXT also offers customized bundles tailored to different professions, like construction workers or architects.

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Other types of insurance for independent contractors

When you’re self-employed, the responsibility for purchasing the right insurance coverage falls to you. Some other types of insurance that you may need to purchase as an independent contractor include:

• Commercial auto insurance: Commercial auto insurance is critical if you own, lease, or rent cars or trucks as part of your business. Commercial auto insurance will cover vehicle damages, business property damages, and medical expenses if you (or an employee) are at fault in an accident. This type of insurance costs about  $750 to $1,200 per vehicle per year
• Workers’ compensation insurance: Workers’ compensation policies, also known as workman’s comp or workers’ comp, protects your business by providing benefits to your employee. This covers medical care, lost wages, disability insurance, or funeral costs. A small business owner with just a few employees can expect to pay approximately $2,000 to $3,000 per year
• Independent contractor health insurance: If you’re self-employed, you may need to purchase health insurance as a freelancer. Depending on your income and family size, you may be eligible for a premium tax credit that lowers the cost of a plan purchased through the Health Insurance Marketplace. You may also be able to claim a self-employed health insurance deduction on your taxes
• Commercial property insurance: If you are running your business out of your home, then you may want to consider purchasing commercial property insurance. This provides more coverage than your average homeowner's insurance policy. An average small business commercial insurance policy costs between $500 and $3,000 per year
• Business income insurance: Business income insurance exists solely to replace lost income due to things like fire damage, wind damage, or theft. If your business is unable to operate due to damages, this insurance helps cover your costs until you're up and running again. Business income insurance costs between $40 and $130 a month
• Errors and omissions insurance: Errors and omissions insurance (E&O), also known as professional liability insurance, protects you and your business in the event that you make a mistake while providing professional services. This type of insurance helps cover you against claims of negligence, misrepresentation, or inaccurate advice. It costs approximately $500 to $1,000 per year
• Rideshare insurance: If you drive for a rideshare app like Uber or Lyft, you may need to purchase rideshare insurance. This type of insurance coverage is in addition to your regular auto insurance policy. Rideshare insurance usually costs about $10 to $30 per month

No matter what type of small business or side hustle you’re running, getting the right insurance coverage can help to set you up for success. 

General liability insurance, like many other types of business insurance, can also be deducted on your taxes — which will help you offset the cost. Plus, you can rest safe knowing that your business is protected from risk.