What Types of Business Insurance Do I Need as a Contractor?

There are several kinds of insurance any small business needs, and there are types of insurance that contractors need that other businesses may not. That is aside from the insurance customers may require from their contractors before they even consider hiring them for work. But what type of insurance is essential for contractors in particular? Let’s address each in detail.

Worker’s Compensation

If you have employees, you are probably legally obligated to have workers compensation insurance. In this instance, you could be hit with a fine for not having it. Worker’s compensation rates are based on the risk and hazards associated with the work. Worker’s compensation insurance, along with general liability insurance, is often the minimum insurance you need to prove you have to be considered by many clients.

Liability Insurance

Contractors are typically professionals paid for their expertise or their skills. If you make a mistake, you’re on the hook for the consequences. Professional liability coverage provides a measure of protection from the worst consequences. This type of liability insurance could protect the contractor if they cause injury to someone at a work site, by paying the victim’s medical bills. That’s why many contractors should consider getting professional liability insurance in addition to general liability insurance.

General liability insurance should be seen as essential for contractors. General liability insurance provides protection for you and your assets after an accident or disaster. It would cover the medical bills for someone who is injured when visiting your worksite or pay the bills if your equipment was used incorrectly. Liability insurance will also help you cope with damages and costs after the judgment has been passed.

General liability insurance can also provide the next level of coverage, paying the bills above and beyond the coverage provided by your company’s commercial auto insurance. You will want to ensure you have coverage so buy contractors insurance at next-insurance.com to get the coverage you need at a reasonable rate.

If you damage someone’s property or if your business is in any way, shape, or form responsible for them not being able to use their property, liability insurance will have you covered. Some liability insurance will even protect you against copyright claims or, in the case equipment installed by your company, damage caused.

The cost you pay on liability insurance will largely depend on the level of risk of your business. For instance, if you’re in a low-risk business, you might want to seek coverage under a business owner’s policy over liability insurance. Those who are in a line of business with higher chances for damages, such as roofing or those in highly specialized trades, will usually require the biggest insurance coverage.

You should also know that there are limitations to liability insurance. For instance, there are some limits on fire damage during construction or medical costs for injuries to workers who may not be covered under workers comp.

Commercial Auto Insurance

Personal auto insurance doesn’t cover accidents when you’re driving a personal vehicle for work, whether you’re making deliveries to a customer or driving to a work site. Commercial auto insurance typically covers you if you’re driving someone else’s vehicle for commercial purposes, such as using someone else’s vehicle to pick up supplies.

Disability Insurance

Contractors are, by definition, self-employed. You should have disability insurance to pay your loss of earnings if the injury is bad enough to keep you away from the job long-term. Disability insurance typically waits a few weeks before kicking in. Short-term disability pays out for up to twelve weeks, while long-term disability provides coverage after short-term disability insurance ends.

Disability insurance is critical if you’re doing potentially dangerous work like working in construction. You should consider securing disability insurance even if your job is rather mundane since a car crash could sideline you for months, preventing you from earning a living even as the bills pile up.

A Performance Bond

A performance bond generally means the work will be done to the necessary standard, though the bond money may be released if the contractor cannot complete the repair. For example, a performance bond may release the money to finish a project if the contractor is injured on the job and unable to finish the work themselves. The performance bond prevents the contractor from being sued for damages because they didn’t finish the work on time and to specification.

Errors and Omissions Insurance

Errors and omissions insurance pays out when someone sues you for poor performance or non-performance. This type of insurance is common for professionals like accountants and attorneys. Engineers and other consultants should have errors and omissions insurance.


Failing to carry the necessary insurance could cost you jobs. Trying to work without full insurance coverage leaves you vulnerable to lawsuits and costly bills that could cost you your business, personal assets, or both.



Author: Tobi Walter

Clayton Noblit is A Marketing Manager at Shoeboxed. When he's not spreading the word about Shoeboxed, he enjoys exercising and carving wooden spoons.