In a recent study with Worldwide Business Research (WBR) Insights, it was identified that 86% of companies interviewed planned to increase their use of independent contractors (1099 workers) in the coming year. This makes for an exciting time for independent contractors, who tend to enjoy the flexibility of contracting roles and who offer organizations their expertise and skillsets on a project-by-project basis. However, when it comes to the differences between 1099 workers versus W2 employees, there are many. Whether it’s the ease of onboarding and starting work or regarding pay options, contractors like knowing they’re being supported by the paying organization. One area of concern for organizations and contractors alike– especially when on-site client work is involved – pertains to liability insurance and their options for coverage.
What is liability insurance for independent contractors?
For independent contractors, Occupational Accident Insurance (OAI) and General Liability Insurance (GL) are indispensable. Unlike workers' comp or employer-provided healthcare insurance, which are typically not available to independent contractors, these insurances provide a safety net. While businesses might have liability insurance, it often does not cover independent contractors, and this can require them to seek their own coverage to complete work orders. OAI, for instance, shields contractors from on-site accidents, thereby helping to protect businesses from legal and financial repercussions. Similarly, GL is a necessity often required by states and clients, safeguarding against third-party claims of bodily injury or property damage. Together, OAI and GL form a comprehensive protective shield, helping to ensure that both contractors and the businesses they serve are safeguarded from a range of unforeseen circumstances.
Why do independent contractors need general liability insurance?
Independent contractors often aren't covered by workers' compensation, making general liability insurance crucial. General liability protects against third-party claims, like bodily injury or property damage, a requirement in many states and for specific clients before they accept work. This helps ensure contractors and their clients have peace of mind, knowing potential issues are covered and allowing focus on the work. General liability covers a range of expenses from accidents during work. Still, it doesn't cover the contractor's personal injuries, damage done on purpose, the contractor's property, vehicles, poor workmanship, or service mistakes. It might have deductibles and only covers up to its limit, emphasizing its role in protecting against external claims rather than internal losses.
What about occupational accident insurance for independent contractors?
Occupational Accident Insurance for independent contractors provides financial protection for contractors who may face job-related injuries. This type of insurance goes beyond basic medical coverage by offering comprehensive support for medical expenses not covered by personal health insurance. Additionally, it extends to encompass disability, death, and dismemberment benefits, thereby ensuring a comprehensive safety net for independent contractors. This insurance is essential for contract workers without access to workers' compensation due to their non-employee status. Furthermore, depending on the specific policy, it may also include coverage for loss of income due to disability, thus serving as a vital resource for maintaining financial stability during challenging times.
Why should contractors have general liability and occupational accident insurance?
Contractors working on sites with physical risks or dangers could benefit significantly from GL and OAI. This includes the following:
Construction workers who face hazardous conditions at high-risk job sites
IT field service personnel handling heavy and costly equipment
Electricians and plumbers who might cause electrical fires or water damage
Cleaning or maintenance staff dealing with dangerous substances and on-site hazards
Transportation and delivery drivers for any potential damage or injuries caused to third-party property or persons
Fitness professionals to protect themselves against the financial repercussions of physical injuries sustained by their students (through GL) or themselves (with OAI)
These policies offer crucial protection in industries where the risk of injury or damage is inherent to the job. It offers peace-of-mind for the workers and the businesses paying them while they handle their assignments on-site.
How much is liability insurance for an independent contractor?
General liability insurance for independent contractors offers flexibility that can be tailored according to the specific demands of the work involved. This customization helps ensure that the premiums are directly proportional to the coverage needed, matching the level of risk undertaken by the policyholder. It's a cost-effective approach that helps ensure contractors are not over-insured for lower-risk projects. Additionally, the availability of "pay as you go" plans introduces the benefit of purchasing insurance coverage for just the duration of specific projects, sidestepping the need for a year-long commitment. This option is particularly beneficial for contractors with varying project scopes and timelines, allowing them to adjust their coverage per their current needs while ensuring they're adequately protected against unforeseen liabilities.
Why you need to make insurance accessible to your independent contractors?
Choosing to work with insured contractors carries several advantages. Not only are insured contractors more likely to possess proper licensing, but they may be viewed to uphold a higher set of professional standards and have a more reputable standing within their industry. By contrast, if a contractor cannot cover damages claims, your business might find itself bearing the financial burden of these costs. It's important to note that in certain states, having insurance is not just a preference but a legal requirement. By opting for insured contractors, your business helps ensure compliance with these regulations. Furthermore, having insured contractors provides a layer of protection, offering peace of mind that any expenses resulting from accidents or injuries will be dealt with and covered, thus safeguarding your business from potential financial liabilities.
How technology can help
Partnering with an automated independent contractor management system, such as WorkMarket by ADP, offers a streamlined and comprehensive approach for organizations to manage their contractors fully. WorkMarket not only facilitates the onboarding, payment, and management of contractors from a singular, integrated platform but also helps enhance compliance. We also offer organizations access to our IT field service marketplace, which offers them a pool of workers to sort through and build their bench of talent. An added advantage of utilizing such systems is their capability to offer third-party insurance options. Contractors can opt into these insurance plans during the assignment workflow process, ensuring they're covered even before stepping onto a project site.
Through WorkMarket, we partner with a third-party broker, Bunker, to help offer workers the services of vendors like Crum & Forster for OAI and Evanston Insurance for GL. These vendors address the client need for contractors looking for coverage like Workers' Compensation and General Liability. In the platform, a client’s workers can register and agree to their coverage terms and get peace of mind before starting an assignment.
This feature is incredibly beneficial, providing peace of mind to both the organization and its contractors. Insurance coverage is offered on a per-project basis and is designed to be cost-effective for the worker, minimizing the financial burden while maximizing protection.
