How to Get Liability Insurance for the Self-Employed

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A close-up of work gloves on a bench in a shop.
A close-up of work gloves on a bench in a shop. (Image: Footsicle/iStock/Getty Images)

Accidents happen, and liability insurance provides protection for you and your customers. If you or an employee damage property at a client’s home or business, or if a customer slips and falls in your store, liability insurance pays for the damages. If you're a plumber or and electrician, you’ll need liability insurance in order to work as a sub-contractor for larger firms, to bid on government contracts, and as a part of state licensing requirements in some states. Many companies offer liability insurance to the self-employed.

What Do You Need?

Depending on the type of work you do, you’ll need different types of liability insurance. General liability insurance protects you if a customer has an accident in your place of business, if you or an employee causes damage at a customer’s home or place or business, or if work you do has a defect or leads to damage. Contractors Liability Insurance protects those who ply specific trades such as home builders, heating and air conditioning contractors and electricians. If you’re a professional who offers consulting services, you’ll need Errors and Omissions Insurance, which protects you if a client sues, claiming you’ve made an error.

Additional Coverage

Any liability insurance policy you choose will have coverage limits. If you’re worried that your policy provides insufficient coverage, you can purchase Excess Liability insurance, which adds another $1 million above what your regular liability policy covers. If you have employees who drive your vehicles, you can add a non-owned liability insurance rider to your automobile insurance policy. Finally, if you worry that you might be held personally liable for a business-related incident, you can purchase a personal liability policy.

Finding Insurance

The search for insurance starts with your regular insurance agent. An agent who specializes in homeowners and auto insurance may not offer liability coverage, but he should be able to direct you to agents who do. If you belong to a professional organization, other members of the group may be able to recommend the insurance agents they use. Your local chamber of commerce and your state insurance board may also keep lists of agents who offer liability insurance for small business owners.

Buying the Policy

An insurance agent who specializes in insurance for business can go over your options for liability insurance. Rates vary, so compare policies from different insurers. You may qualify for a discount on your policy if you purchase several kinds of insurance from the same company. For example, if you insure a company vehicle and also purchase liability insurance from the same company, you may get a price break. Some insurers offer discounts to members of trade groups or other organizations. You can also save money by opting for a larger deductible. But make sure you can afford to pay the deductible if someone makes a claim against you. A $10,000 deductible may seem like a big money-saver, but not if you don’t have that much cash set aside if someone files a claim.

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