Independent contractor insurance: What it is, what it covers and what it costs in 2025

What is an independent contractor?

In the simplest terms, an independent contractor is a self-employed person. However, not everyone who is self-employed is an independent contractor.

Two of the hallmarks of an independent contractor are that they control what work they accept, and taxes aren’t withheld when paid. For a traditional W-2 employee, the employer will withhold federal income tax, Social Security, and Medicare payments. This isn’t true for an independent contractor. 

“[A]n individual is an independent contractor if the person for whom the services are performed has the right to control or direct only the result of the work and not what will be done and how it will be done,” according to the IRS.

The IRS also breaks the person’s independence into three different categories, including:

• Behavioral. Does the company that the independent contractor works with control, or have the right to control, what the person does and how they do it?
• Financial. What control does the company have over how the independent contractor is paid and reimbursed for expenses?
• Type of relationship. What are the contracts and benefits associated with the work? Are the benefits similar to what you would expect for employees, such as vacation and insurance?

What kind of insurance does an independent contractor need?

The kind of insurance an independent contractor needs is partially determined by the type of work they do. 

A lawyer, for instance, won’t necessarily need the same type of insurance as a personal trainer. The professions do different work and therefore face different risks.

However, most independent contractors should consider the following insurance policies:

• Commercial auto. Similar to a personal car insurance policy, this covers company vehicles, but may also include the use of rentals or employees’ personal vehicles.  
• General liability. Sometimes called commercial general liability (CGL), this protects against non-employee bodily injury, destruction of property, personal injury (such as slander and libel) and false or misleading claims. It also covers legal and medical bills under these four circumstances.
• Commercial property. This covers your property, such as buildings, equipment, supplies, and inventory, from events such as fires, burglaries and vandalism.
• Business owners policy (BOP). A BOP provides a few different types of coverage under one policy. These typically include coverage for business property and liability and often business interruptions. Coverage for commercial auto, workers’ comp and professional liability isn’t typically included.
• Professional liability. You may also see this referred to as errors and omissions (E&O) insurance. It covers you for mistakes, negligence, misrepresentations and more. Medical and legal malpractice are considered a type of professional liability.  
• Umbrella. An umbrella policy provides higher coverage limits than typical commercial liability policies. However, it will only cover what your existing liability policies cover and won’t kick in unless you surpass the coverage limits of those policies.

“Ultimately, while many of the same policies are available to all small businesses, independent contractors should focus on coverage that aligns with their solo operations and client requirements,” Thelen says.

How much is independent contractor insurance?

How much insurance will cost for an independent contractor will depend on a variety of factors, including the type and amount of coverage purchased. 

The cost of insurance for an independent contractor can be minimal. For instance, general liability costs an average of $42 per month, according to small business insurance broker Insureon. 

As a point of reference, here are the average costs for three of the more popular types of policies for independent contractors, according to Insureon. 

Working with a business advisor or licensed insurance agent or broker can help you purchase the necessary amount of coverage without becoming overinsured and help you find potential discounts.

Insurance companies for independent contractors

There are a number of insurance companies that offer policies for independent contractors, including: 

• American Family offers general liability, building and property, inland marine, commercial auto and more. The company says it can tailor its coverage for its clients. 
• BiBerk provides professional liability, general liability, BOP, umbrella, cyber and more. It also says it can customize its business insurance.
• The Hartford offers general liability, commercial property and business income insurance, among others.  
• Next Insurance specializes in policies for small and medium businesses. It was purchased by Munich Re, one of the largest insurance and reinsurance companies in the world, in the spring of 2025. Among its offerings: professional liability, general liability and commercial property.
• USAA is known for specializing in financial products for members of the armed services, select family members and veterans. It lists several commercial insurance options among its products.

Insurance.com has also analyzed and compiled a list of the best small business insurance providers to help you confidently compare business insurance quotes tailored to your industry.

Independent contractor insurance requirements

Whether or not you’re required to have insurance as an independent contractor will depend on several factors, including:

• State laws. Because states set insurance requirements, whether or not you are legally required to purchase insurance will vary from one state to the next. For instance, some states require construction professionals to carry general liability, according to Insureon.
• Profession. Different professions will have different insurance needs. If you work in construction or with hazardous materials, some states may require you to carry workers’ compensation even if you don’t have any other employees, Thelen says.
• Vendors. Some vendors may require you to carry specific forms of insurance, such as general liability.
• Landlords. If you’re renting space for your business, your landlord may require you to have some form of liability coverage.

Step-by-step guide to getting independent contractors’ insurance

Here are the basic steps to getting an insurance policy:

1. Select an insurance company. Choose a carrier that offers the coverage you need at a price that works best for you. Experts recommend getting and comparing at least three quotes.
2. Apply. Your agent or broker can help you with this process and tell you what information to have ready when you begin the application. The insurance company will then review your application and may do its own research to determine whether or not to sell you a policy and calculate your premiums.
3. Review the policy. After the insurance company makes its determination and offers you a policy, you should take some time to review it to ensure you fully understand what is and isn’t covered. You may even want a third party, like a lawyer or business advisor, to review it with you.
4. Sign. Once you have reviewed your policy, sign it. Coverage will begin, minus any waiting periods.

As mentioned above, when purchasing independent contractors’ insurance, you may want to work with an insurance agent or independent broker who can help you understand what your insurance requirements will be and the appropriate amount of coverage for each policy.

You can also do your own research by looking at professional reviews, NAIC customer complaints, talking to fellow independent contractors, and J.D. Power customer satisfaction surveys. 

And, remember, insurance isn’t a “set it and forget it” proposition. 

Tyler Peterson, head of professional risks at commercial insurance specialist Hiscox USA, says independent contractors should review their policies at least every two years to ensure they are still adequately covered. She suggests they also review their policies if their businesses change, such as when they expand or contract operations.

What our expert says

Q: Is there such a thing as an independent contractor insurance policy?

Kristen Thelen Director of account management at small-business insurance broker Insureon.

"Independent contractor insurance is an umbrella term. It is not a single policy but rather a suite of policies…. These policies are tailored to the independent contractor’s specific industry and needs."

Q: How often should independent contractors review their insurance policies?

Tyler Peterson Head of professional risks at small business insurer Hiscox.

"Independent contractors should review their policies at a minimum of every two years to ensure they are still adequately covered. She suggests they also should review their policies if there are changes to their businesses, such as when they’re expanding or contracting operations."