What Insurance Do Independent Contractors Need in Canada?
Independent contracting continues to grow across Canada, particularly in the construction, consulting, trades, IT, and professional services sectors. While being an independent contractor offers flexibility and control, it also comes with significant financial risk. Unlike employees, independent contractors are not protected by employer-provided benefits or insurance.
So, what insurance do independent contractors need to protect themselves, meet client expectations, and stay financially secure?
In this guide, we’ll explain the essential types of insurance for independent contractors in Canada, why they matter, how much they cost, and how a trusted insurance provider like Liebel Insurance (LI Group) can help you secure the right business insurance policy.
Why Is Insurance Essential for Independent Contractors in Canada?
Independent contractors face unique risks that regular employees do not, making insurance essential for their protection. They usually aren’t automatically covered under a business’s insurance policy. Businesses may assume that contractors are covered under their business insurance, which can lead to costly surprises.
Contractors who work independently are typically responsible for having their own insurance coverage. If a contractor is not covered under a business’s insurance policy, the business could end up footing the bill for damages or liability caused by the contractor. As a result, many businesses require independent contractors to carry their own liability insurance before working with them.
Independent contractors face total personal liability for lawsuits, equipment loss, or medical emergencies without insurance protections. A single lawsuit or theft can lead to expenses that can bankrupt a solo operation without insurance.
Carrying insurance signals to potential clients that a contractor is a serious and responsible professional and helps establish credibility when bidding on projects.
What Are Insurance Requirements for Independent Contractors?
Independent contractors need various types of insurance to mitigate financial risks and satisfy client requirements. They may need to provide proof of insurance to clients as a condition of securing work.
Contractual Requirement: Many clients, particularly large corporations, demand a Certificate of Insurance (COI) before hiring contractors. Proof of insurance may be required by clients or project managers before hiring independent contractors.
To protect themselves, business owners may want to request proof of insurance from independent contractors. Adding independent contractors as additional insureds on a business’s policy can provide coverage for them under that policy, but independent contractors should never rely on this alone.
What is General Liability Insurance for Independent Contractors?
Independent contractors should consider general liability insurance to protect against third-party claims of bodily injury and property damage.
General liability insurance protects contractors from claims of bodily injury and property damage. General liability insurance for independent contractors can cover third-party injuries and property damage resulting from their actions. Coverage includes claims of bodily injury, property damage, and advertising injury, including legal defense costs.
What Does a Commercial General Liability Insurance Policy Cover?
A general liability insurance policy typically includes coverage for:
- Bodily injury liability
- Property damage
- Medical bills and medical expenses
- Legal fees and legal expenses
- Legal costs associated with liability claims
- Advertising injury
Common client claims scenarios for independent contractors include property damage during a project and injuries caused by their tools or equipment. Whether working on construction job sites or inside a client’s home or office, contractor liability insurance is foundational protection.
What is Professional Liability Insurance (Errors & Omissions) for Contractors?
Professional liability insurance is also known as errors and omissions insurance. It is a type of liability insurance that protects independent contractors from claims related to professional mistakes or negligence.
Professional liability insurance protects independent contractors against claims of negligence or failure to deliver services as promised. Mistakes made by independent contractors can lead to costly claims, making liability insurance critical for financial protection.
Professional Liability Coverage Includes:
- Claims involving professional services
- Errors, omissions, or negligent advice
- Financial loss suffered by a client
- Legal liability, settlements, and legal costs
This coverage is especially important for consultants, designers, engineers, IT professionals, and anyone providing professional advice or services.
What Is Commercial Auto Insurance for Contractors?
Commercial auto insurance is necessary for independent contractors who use their personal vehicles for work-related purposes.
It is mandatory for independent contractors who use their personal vehicle for work-related purposes to have commercial auto insurance. It provides bodily injury liability and coverage, property damage protection, and comprehensive coverage for work-related driving.
Without commercial auto insurance, personal auto policies may deny claims related to business use, leaving contractors responsible for medical expenses, repair or replacement costs, and legal costs.
What is Workers’ Compensation Insurance for Independent Contractors?
Workers’ compensation insurance provides wage replacement and medical benefits to workers injured on the job. Coverage doesn’t automatically include independent contractors, but they can apply for optional personal coverage. In Canada, this may involve provincial programs such as WSIB in Ontario or equivalent organizations in other provinces.
If a contractor is injured on the job and not properly covered, the business could end up footing the bill if not properly covered, leading to disputes and financial exposure for both parties
What is Commercial Property Insurance & Business Income Insurance for Contractors?
Independent contractors who own or lease space or store equipment should consider commercial property insurance.
This coverage helps protect against:
- Property damage due to fire, theft, or vandalism
- Loss of inventory or equipment
- Repair or replacement costs
Business Interruption Insurance, another essential type of business insurance, replaces lost net income if a business is forced to close temporarily due to a covered event. This is especially valuable for contractors whose income depends on uninterrupted business operations.
What is Tools and Equipment Insurance for Contractors?
Tools and Equipment Insurance covers the repair or replacement of specialized gear if stolen or damaged.
For contractors who rely on tools to complete work, this coverage protects against theft on job sites, accidental damage, and loss during transport.
What Is Life Insurance for Independent Contractors?
Life insurance is an important but often overlooked form of protection for independent contractors in Canada. Unlike employees, contractors do not have access to employer-sponsored life insurance benefits, making personal coverage essential.
Life Insurance provides a financial buffer for families in the event of a contractor’s death, helping cover outstanding debts, living expenses, and future financial obligations.
For contractors who are the primary income earners in their households or who have business loans, life insurance ensures loved ones are not left with financial hardship if the unexpected occurs.
It can also be used to protect business partners or fund succession planning, making it a valuable component of a well-rounded business insurance strategy.
What Is Cyber Liability Insurance for Independent Contractors?
As more independent contractors rely on digital tools, cloud platforms, and electronic communication, cyber risks have become a growing concern. Cyber Liability Insurance protects if sensitive client data is handled and a data breach occurs.
This type of insurance can help cover legal costs, notification expenses, data recovery, and potential regulatory fines following a cyber incident.
Independent contractors in consulting, IT, marketing, accounting, and other professional services may be especially vulnerable to cyber threats, even if they operate as small or home-based businesses.
Cyber liability insurance helps safeguard business operations and client trust while reducing the financial impact of cyber-related claims.
Additional Insurance Coverage Independent Contractors Should Consider
Independent contractors should consider additional coverages like equipment breakdown insurance based on their specific needs.
Other optional but valuable coverages include:
- Product liability insurance for contractors who manufacture or sell products
- Disability Insurance replaces a portion of income if an illness or injury prevents working.
- Any type of insurance that helps them cut costs and avoid risky, unexpected situations that can result in hefty expenses.
Are Independent Contractors Covered Under a Client’s Insurance?
Independent contractors are not automatically covered under a business’s insurance policy. They typically need to obtain their own insurance coverage as they are not automatically covered under a business’s insurance policy.
If a contractor causes property damage or is injured on the job, the business could end up footing the bill if not properly covered. This is why independent contractors should confirm that they have their own liability insurance to protect against potential claims.
How Much Does Insurance for Independent Contractors Cost in Canada?
The cost of contractor insurance can start from $450 annually for a basic policy with a $2 million limit for small or medium-sized businesses.
Factors that influence the cost of insurance for independent contractors include the type of work, location, and the contractor’s experience.
In many regions, including Canada, independent contractor insurance premiums are fully tax-deductible as a business expense.
How to Get an Insurance Quote as an Independent Contractor
The process of obtaining insurance for independent contractors can be simplified by completing an online application for a quote. Insurance companies may require independent contractors to answer questions about their business to provide tailored policy options.
Working with an experienced insurance company like Liebel Insurance ensures you receive coverage that matches your risks and meets client insurance requirements.
Why Choose Liebel Insurance for Independent Contractor Insurance?
Liebel Insurance (LI Group) specializes in independent contractor insurance and business insurance solutions across Canada.
Their team helps business owners secure:
- General liability insurance
- Professional liability insurance
- Commercial auto insurance
- Construction liability insurance
- Tools insurance, and commercial property insurance
- Comprehensive contractor insurance policy options
Get a personalized insurance quote from Liebel Insurance today.
GET A QUOTEFAQs: Insurance for Independent Contractors in Canada
What insurance do independent contractors need in Canada?
Independent contractors typically need general liability insurance, professional liability insurance, commercial auto insurance, and optional workers’ compensation, tools insurance, and business income insurance, depending on their industry.
Is insurance mandatory for independent contractors?
Insurance is not always legally mandatory, but many businesses require independent contractors to carry their own liability insurance before working with them.
Are independent contractors covered under a business’s insurance?
No. Independent contractors are not automatically covered under a business’s insurance policy and are responsible for having their own insurance coverage.
Does general liability insurance cover medical expenses?
Yes. General liability insurance can cover medical costs, medical bills, legal fees, and legal costs related to third-party bodily injury claims.
How much does contractor insurance cost?
Costs vary, but basic coverage can start around $450 annually. Final pricing depends on risk, location, and coverage needs.
Do clients require proof of insurance?
Yes. Independent contractors may need to provide proof of insurance to clients as a condition of doing business.
How do I get insured quickly?
Liebel Insurance makes it easy to get a fast insurance quote and customized contractor insurance policy online or by phone.
Protect Your Business with the Right Insurance
Independent contractors are responsible for having their own insurance coverage and the right policy protects your income, reputation, and future.
Talk to Liebel Insurance today to secure the right coverage designed to protect independent contractors across Canada.
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