Independent Contractors Liability Insurance: What Freelancers Need To Know

Professional liability policies typically define who’s insured as the business and its employees. Freelance consultants, designers, accountants, and other independent contractors usually fall outside that definition, even when the claim involves work they did for the insured client. Independent contractors liability insurance covers that gap. It can pay defense costs and settlements when a client says your work caused it a financial loss.

Whether a client’s policy extends to you depends on its wording. A contract clause naming you as an additional insured can change the answer, but that clause is uncommon for professional liability. Without one, you’d be defending the claim yourself.

What Liability Coverage Might Freelancers Need?

About 11.9 million people worked as independent contractors in their main job in July 2023, or 7.4% of total employment, according to the U.S. Bureau of Labor Statistics. Freelancing offers real advantages, along with trade-offs, including managing your own risk.

Two types of coverage matter most for freelancers who serve business clients:

• Professional liability generally addresses covered claims alleging errors, omissions, or other failures in your professional services that cause a client financial harm.
• General liability generally addresses covered claims of third-party bodily injury or property damage, such as a visitor tripping over your equipment.

For example, suppose a consultant helps a midsize company overhaul its inventory process. The new process then leads to costly shortages, and the client blames the consultant’s recommendations. That’s the kind of claim professional liability is designed to address.

Independent contractors liability insurance isn’t a single standardized policy. The right coverage depends on the services you perform and the exposures involved.

Does a Client’s Policy Cover Independent Contractors?

Some client policies exclude independent contractors. Others extend coverage to them only under specified conditions, and some require contractors to carry their own insurance.

A client’s policy may cover the client’s own liability arising from a contractor’s work. That isn’t the same as extending insured status to the contractor personally. And if the client itself alleges that a contractor’s advice caused a financial loss, the contractor shouldn’t assume the client’s policy will respond.

If you’re relying on a client’s coverage in any way, ask to see the policy wording and check:

• Who qualifies as an insured: Look for whether independent contractors appear in the definition.
• Which professional services and activities are covered: Your work may or may not fall within them.
• Whether conditions or restrictions apply to contractors: Some policies set specific requirements.

The policy wording and the circumstances of a claim will determine the outcome.

What Insurance Requirements Should Freelancers Check?

Start with the client agreement. Many contracts require freelancers to carry their own liability insurance or a specific type of coverage. Meeting that requirement doesn’t by itself guarantee your policy will cover a particular claim.

Compare the agreement’s requirements with your own policy. Pay close attention to the professional services it covers, who qualifies as an insured, and any conditions or restrictions that apply.

Settle who is responsible for maintaining insurance before you accept an engagement, and confirm that the work falls within the relevant policy terms.

Know Who Your Policy Protects

Before you start work, read the insurance section of the contract and get the details of any coverage you’re counting on, including the client’s. If the client’s policy doesn’t name you as an insured, plan on carrying your own.

To talk through professional liability insurance options that fit the work you do, give us a call.

About Daniels Insurance, Inc.

At Daniels Insurance, Inc., we have a unique understanding of the risks that businesses like yours face on a regular basis. With the backing of our comprehensive coverages and our dedication to customer service and quick claims resolution, your business will be fully protected. For more information, contact us today at (855) 565-7616.