Running your own business brings flexibility and freedom — but it also means taking full responsibility for protecting yourself and your income. One of the most important ways to do that is insurance.
Independent contractors aren’t typically covered by an employer’s plan. So if something goes wrong, for example an accident on a job site, a lawsuit from a client, or a stolen tool, you’re the one on the hook.
Whether you’re just starting out or have years of experience, this guide breaks down the most important insurance coverages for independent contractors. We’ll also walk through costs, tips, and how the right protection gives you (and your clients) peace of mind.
In this guide:
- What defines an independent contractor
- Types of insurance you may need
- Costs and coverage examples
- How to get a certificate of insurance
- Tips to protect your business and win more jobs
What Defines an Independent Contractor?
Independent contractors (also known as 1099 workers) are self-employed individuals who provide a product or service to clients, but are not considered employees.
You might be a contractor if:
- You set your own rates and hours
- You receive a 1099 form for taxes
- You’re hired to complete specific tasks or projects
- You work on-site or remotely with different clients
Examples of common contractor jobs:
- Home repair, plumbing, or electrical
- Freelance marketing or graphic design
- Cleaning services
- Virtual assistance or consulting
Rideshare, delivery, or courier work
If you’re working independently, you’re also responsible for choosing the type of insurance that fits your business. And staying on top of paperwork is essential — especially when it comes to getting paid.
Not sure what makes an invoice different from other documents?
Start with our full guide: What is an Invoice? Everything You Need to Know.
What Insurance Do Independent Contractors Need?
There’s no one-size-fits-all policy. The type of work you do, where you operate, and the clients you serve all play a role. But here are the essential types of insurance for most independent contractors:
1. General Liability Insurance
This is the most common (and often most important) coverage for small businesses and contractors.
General liability insurance for independent contractors covers:
- Third-party bodily injury (e.g. a client trips over your ladder)
- Property damage (e.g. you break a window on a job)
- Advertising injury (e.g. copyright infringement or defamation)
- Legal fees if you’re sued
Best for: Contractors who work on job sites, visit client locations, or interact with the public.
How much does general liability insurance cost? Typically $400–$800/year for $1 million in coverage, depending on your type of business and risk level.
2. Professional Liability Insurance for independent contractors (Errors and Omissions Insurance)
Also called E&O insurance, this policy protects against claims of negligence, missed deadlines, or errors in your work. Even if it wasn’t your fault.
Covers:
- Client financial loss due to your service
- Legal fees and settlements
- Mistakes in advice, reports, or creative work
Best for: Freelancers, consultants, designers, writers, and marketing professionals.
Example: You create a campaign that includes a typo, causing your client to lose money. Professional liability helps cover the damage.
3. Workers’ Compensation Insurance
If you’re injured on the job, workers’ comp can cover:
- Medical expenses
- Lost income
- Rehabilitation costs
Even sole proprietors may be required to carry workers’ comp depending on state laws or if you’re working with subcontractors.
Best for: Any contractor doing physical work or operating in high-risk environments.
4. Commercial Auto Insurance
If you use a personal vehicle for business tasks — delivering materials, transporting tools, visiting job sites — you may need a commercial auto policy.
Covers:
- Liability for accidents while driving for work
- Damage to your vehicle or someone else’s
- Theft of tools or materials in transit
Most personal car insurance policies exclude business use — so if you’re in an accident, you could be left uncovered.
5. Other Insurance Coverages to Consider
Depending on your type of work, you may also want to explore:
- Business property insurance – protects your tools, equipment, or rented space
- Cyber liability – protects against data breaches or hacks
- Inland marine insurance – covers gear or goods while in transport
- Business owner’s policy (BOP) – bundles general liability cover + property at a lower cost
Want to simplify your billing setup too? Try: What Information is Needed for Direct Deposit Setup?
Who Needs Contractor Liability Insurance?
Short answer: Nearly all independent contractors and small business owners.
If you:
- Work on-site
- Deal with client data or finances
- Use physical tools or expensive equipment
- Want to work with high-paying clients or companies
- Operate in construction, consulting, cleaning, delivery, or trades
…then having liability insurance isn’t just a good idea — it could be the difference between landing the job or losing it.
Top Tip: Clients often ask for a certificate of insurance (COI) before hiring you. It’s proof that your coverage is active.
If your clients ask for estimates before hiring you, it’s also a good idea to understand how quotes differ from invoices. This helps avoid confusion and sets clear expectations.
Learn more: Invoice vs. Quote: What’s the Difference?.
How Much Does Independent Contractor Insurance Cost?
Your costs depend on several factors:
- Your type of business
- State and location
- Claims history
- Type of coverage limits and deductibles
Type of Insurance | Average Cost (Annual) |
General Liability | $400–$800 |
Professional Liability | $500–$1,000 |
Commercial Auto | $750–$1,200 |
Workers’ Compensation | Varies by state and trade |
BOP (Bundle) | $600–$1,200 |
To lower your premiums:
- Bundle policies with one provider
- Maintain a clean claims history
- Choose a higher deductible
5 Tips for Choosing Independent Contractor Insurance
- Know your risks. Think through worst-case scenarios based on your job.
- Talk to multiple insurance companies. Compare quotes and benefits and speak to expert insurance agents.
- Ask for a certificate of insurance. This helps prove coverage to clients.
- Bundle when you can. Save by combining general and property coverage.
- Review yearly. As your business grows, your coverage needs may change.
Want to Win More Jobs? Show You're Covered
Many contractors lose work simply because they can’t provide proof of insurance. Showing clients you’re insured gives them peace of mind and shows you take their job seriously.
Plus, with insurance in place, you’re covered if:
- An accident happens
- A mistake costs someone money
- A tool is lost or stolen
Insurance is one of the smartest business moves you can make because professionalism matters. Especially when clients are comparing bids.
Along with proof of insurance, a well-written invoice builds trust and shows you’re running a serious business.
Need help billing clients properly? Start here: How to Write an Invoice?: Includes Template and Examples
Keep your Insurances Organized With Invoice Fly
Invoicing, client records, and insurance details — keep them all in one place.
With Invoice Fly’s Invoice Maker, you can:
- Add insurance info to your invoices
- Track who paid and who hasn’t
- Accept credit card payments
- Store all your documents digitally
No more paperwork headaches or late-night admin. Just an organized way to bill and protect your business.
FAQs about Independent Contractor Insurance
General liability insurance. It covers bodily injury, property damage, and legal fees.
Sometimes. Some states require it for contractors, even without employees. Check your state’s laws.
Usually not. If you drive to job sites or deliver goods, you likely need commercial auto insurance.
Professional liability (errors and omissions insurance) can protect you if a client sues over negligence or bad results.
It’s a document from your insurance provider proving that you’re covered. Clients may request it before hiring you.
Use a tool like Invoice Fly. It helps you create invoices, store documents, and accept payments in one place.
