Becoming an independent contractor: Insurance
Initially, when I sat down to write this, I was considering just the need for independent contractors to have liability insurance.
Then I started to think … what about health insurance?
As an independent contractor, you are solely responsible for your health insurance. From shopping for the right policy to paying the monthly premium, you are the one tasked with ensuring that coverage is there.
Liability Insurance
The same goes for liability insurance. That is where I will start.
According to insureon.com, independent contractors need general liability insurance because, if something goes wrong, it is the employer who will shoulder the responsibility and that is something they may not accept if you bid on work without liability insurance.
Here are three reasons why independent contractors need liability insurance:
To ensure that contractors can pay lawyers' fees and damages if they're sued over their work.
To ensure that people employing contractors don't end up paying if the contractor is sued.
To meet statutory requirements in states and industries where everyone needs to be covered by insurance (for example, in construction).
General liability insurance can cover things like: bodily injury, slip and fall accidents, copyright infringement, product liability, slander and libel and property damage.
While there is a cost involved in carrying liability insurance, that premium is considerably less than what you would have to pay if found liable for product damage and you don’t have insurance.
Health Insurance
Getting health insurance as an independent contractor is quite a bit different today than it was even five years ago. Now, getting insurance is no harder than going to the HealthCare.gov Marketplace and starting the process of applying.
From there, you can find out if you qualify for various tax credits or even low-cost coverage.
Remember, under the Affordable Care Act, most people must have some form of qualifying health insurance or pay a penalty. This is regardless of your job status.
When you are in the Marketplace, you are required to estimate your annual net income. However, as an independent contractor, that can prove to be a bit difficult. The federal government tells you to “do your best to estimate your self-employment income and expenses for the year.” Of course, if your estimates are off, you can always update your Marketplace application.
In the end, both liability and health insurance are important to have as an independent contractor and should be one of the first things you explore as you enter the world of contracting.
