Should contractors get general liability insurance?

Do independent contractors really need general liability insurance?

YES is the quick answer. There are several reasons why independent contractors require insurance.

IMPORTANT: You can be sued even if you are not at fault. Even if you have done nothing wrong, you will still need to spend money on a lawyer and devote time to handling the lawsuit if a client files one against you. It is possible and common for independent contractors to be sued. Insurance covers you if you injure someone or have a disgruntled customer.

What would happen if you were uninsured?

If you don’t have insurance, you run a higher risk of suffering significant losses due to a lawsuit. You will be accountable for any damages you are found to have caused as well as your legal fees if you are sued and lose in court.

Lack of insurance sometimes leads to other problems. If clients find out that you lack insurance, they could be hesitant to hire you. If you don’t have insurance, they might not take your company as seriously.

Lack of insurance is frequently interpreted as a sign of a contractor who takes shortcuts or lacks business acumen. Without insurance, you might not be allowed to work lawfully in some places. Another thing to consider in the event that you are sued and lose in court, is the capacity not to have insurance. It will be difficult for you to obtain insurance coverage in the future if you are sued and lose in court, and if you do, the cost of the policy will be high.

General Liability Insurance: What is It?

General liability insurance, sometimes known as commercial general liability insurance, is a kind of business insurance that would pay for your legal costs in the event that a non-employee sued you. A liability policy will often cover the following kinds of scenarios, though particular plans may differ:

While individual policies vary, a liability policy will usually cover the following types of situations:

Bodily injury to another person’s body (who is not your employee)
Accidents involving slips and falls
Violation of copyright
Product responsibility
Libel and slander Damage to property
The Operation of General Liability Insurance

But what does General Liability Insurance look like in action?

Example 1: A carpenter temporarily sets down his equipment to fetch something from his truck. While he is doing this, the client wanders over to inspect some of the work. In the process, the client steps on a tool and injures his foot. The contractor is sued by the client. Both the damages and the carpenter’s legal defense are covered by the contractor’s insurance.

Example 2: A painter is renovating the conference room for a company. When a visitor enters to observe what is happening, she trips over the drop cloth, breaks her ankle, and falls. After the visitor files a lawsuit against the contractor, the insurance company pays the damages under the policy.

Example 3: While mowing a lawn, a landscaper loses control of the mower. It collides with a parked vehicle, causing damage that needs major repair. Liability insurance pays for the contractor’s accident-related damages and any associated legal fees.

Insurance’s Advantages for Independent Contractors

As was evident in the previous examples, general liability insurance can save you a lot of trouble and offer you peace of mind when doing business. However, here are some more advantages.

Financial guarantee- Having insurance might provide you peace of mind because it lowers your risk. You can be assured that you will be protected in the event of an emergency. Insurance coverage offers independent contractors the following advantages in addition to that crucial peace of mind.
Covers the costs of your legal protection- Even if you win a lawsuit there are still legal fees, unless you have insurance to cover them. The cost of a lawsuit can quickly make it impossible for you to continue buying inventory or performing work. Insurance allows you to continue working even during a lawsuit.
Grants you leeway to avoid bankruptcy if you are sued. Whether you are in the wrong or not- a lawsuit can hinder your business. Liability insurance can assist you to avoid bankruptcy and continue in your business affairs as usual.
In addition it also assures that you meet the demands. Having insurance assures that you are in a position to work in states that call for compulsory insurance for contractors. In certain states you may not be allowed to work if you don’t have the required insurance coverage.
It gives the client surety to hire you with confidence. An insured contractor shows that they care enough about their work and the business to assure the client they are well prepared.
Finally having general liability insurance makes it effortless for another business or contractor to use your services. If you are a subcontractor and aiming to get projects or jobs from a general contractor or business, you need to be able to show that they won’t incur additional risk. Having your own policy saves them time, money and inconvenience.