Accidents are inevitable. They’re unavoidable, undesirable, unplanned, and incidental events that may be caused by negligence or a lack of precautions and warnings.
A General Liability Insurance, also called Commercial General Liability Insurance, is a type of insurance that protects a business from another business or person’s claims of bodily injury and its associated medical costs, damage to property, personal injury, and lawsuits relating to these injuries.
Moreover, general liability insurance can help pay for the legal costs in the event of a lawsuit and medical expenses for bodily injuries. This type of insurance is a necessary safety net especially for small businesses because it can provide funding when things go wrong.
An independent contractor is a person, a corporation, or a business that provides products and services to another company under agreed terms and conditions specified in a contract or within verbal agreement.
Some employers are generous enough to include insurance for independent contractors in the list of people to cover in their company’s insurance policy but this is usually more expensive than requiring independent contractors to come up with their own insurance policies. Independent contractors need their own general liability insurance so that they wouldn’t end up shouldering the liability and the costs when something goes wrong.
Ways that a General Liability Insurance Protects Your Business
These are usually the types of situations that a General Liability Insurance policy covers:
- Product liability – If your product causes an injury to someone, hurts someone, or causes damage to their property, an insurance can help pay for legal expenses.
- Libel, slander, copyright infringement – These are also known as advertising injury. When someone sues you for advertising injuries such as libel, slander, or copyright infringement, the general liability insurance pays for the lawsuit expenses.
- Physical injuries on someone other than an employee – If someone gets physically hurt because of your product or a negligence on your part, an insurance can help pay for the medical expenses of the person/s injured and even the legal expenses in the event that they sue you in court.
- Slip and fall accidents – This is a common accident for construction businesses. In the event of slip and fall accidents of a customer or a client on your property or caused by your product, an insurance can help pay for the medical expenses of the person/s injured including the legal expenses in case the injured person decides to file for a lawsuit.
- Third-Party property damage – In case you damage the property of a client or customer, an insurance can shoulder the expenses for either repair or replacement of the damaged property.
Kinds of Independent Contractors who need Insurance
Generally, independent contractors need to have insurance to protect themselves, their business, to be able to work legally in some places and to be able to fulfill some requirements by a client and to give clients peace of mind. These are the types of independent contractors who are more likely to need insurance:
- Construction contractors of all types
- Handymen and repair contractors
- Electricians, plumbers, painters, and carpenters
- Home, office, and carpet cleaners
- Dog sitters, walkers, trainers, and groomers
- Animal trainers
Benefits of having a General Liability Insurance for Independent Contractors
Having a general liability insurance reduces risk in case something goes wrong. It gives one peace of mind knowing that if something bad happens, it will be covered by the insurance. Aside from having peace of mind, here are some other benefits that an insurance coverage provides to independent contractors:
- Financial Security – A lawsuit can cost you your business and all your years of work. The cost of a lawsuit is too much that it can quickly make it impossible for you to keep on with your work and to even buy inventory. Having an insurance allows you to continue with your work even during a lawsuit.
- Cover Cost of Legal Defense – Whether you win or lose a lawsuit, you’re required to pay the legal fees unless you have an insurance to cover those. When you’re called to defend yourself in court, you may be faced with huge legal fees. In case you lose, you’ll also need to pay for the damages unless you have an insurance.
- Prevent Bankruptcy – A lawsuit can cause your business to crash whether you’re at fault or not. A single lawsuit may result in bankruptcy leaving you with no way to continue running your business. A general liability insurance helps you avoid bankruptcy by shouldering all the legal costs and other associated expenses so you can continue operating your business despite a lawsuit.
- Gives the Client Confidence and Complacency in Hiring You – Although not all clients require independent contractors to have a general liability insurance, it’s still recommended to have one. Clients know that they’re protected in case of an accident when you are insured and they also know that you care enough about the business and your work to be prepared for any of these unavoidable circumstances.
- Fulfillment of Requirements – There are some states, cities, countries, or industries that require an insurance for independent contractors and for those employees who are working on job sites. Having an insurance will allow you to work in these locations. There are some places where you won’t be able to legally work without having the proper insurance coverage.
- Makes it easy for other businesses or contractors to hire you with confidence – If you are a subcontractor and wish to get jobs or projects from other businesses or contractors, you need to be able to prove that hiring you will not put their company at risk. The best way to demonstrate this is by having your own general liability insurance. You may be covered by their policy but it’s not always the case. Having your own insurance policy saves them money, time, and all the hassles.
Risks Faced by Independent Contractors without Insurance
You increase the risk of incurring huge losses if you don’t carry an insurance that can cover the expenses for your lawsuit. In case you lose a lawsuit, you’ll be responsible for the damages that you’re held liable for and also for the legal fees.
Clients may also be reluctant to hire you once they learn that you’re not insured as it’s a big risk for them. They may also not take your business seriously without an insurance because it just means that you don’t care enough about unforeseen events that may happen within your contract.
A contractor that doesn’t have an insurance is seen as someone who isn’t experienced, business-savvy or as someone who loves taking shortcuts and cuts corners.
As some locations require an insurance to legally work, you wouldn’t be able to work in such locations.