Does my business insurance cover independent contractors?

According to the CBC, almost 25% of Canadians work as independent contractors, freelancers, or gig workers. With the rise of the gig economy, more businesses across Canada are relying on freelancers and contract workers to stay flexible and competitive. But that flexibility can also bring added insurance risks if you’re not careful.

As a business owner or entrepreneur, you know how important it is to have the right insurance in place to protect what you’ve built. But how does that work for the independent contractors you work with?

An independent contractor is a self-employed professional who works with you on a contract basis, meaning they’re not your employee. That means they set their own schedules, usually use their own equipment, and handle their own taxes and benefits. So, are they covered under your current business insurance policy, or is that something they also need to handle separately? Here's what you need to know.

Are independent contractors covered under my insurance by default?

No, independent contractors usually aren’t automatically covered under your business insurance, since they’re seen as separate from your company. That means that unless you’ve specifically added them to your policy or arranged separate coverage, any damage or liability they cause might not be protected under your policy.

Unfortunately, it's not uncommon for businesses, especially small businesses, to assume that contractors are automatically covered by their policy. Some may assume that because someone is doing work for their business, they’re covered under their business insurance.

However, that assumption can lead to costly surprises. For example, if a contractor causes property damage or is injured on the job and you’re not properly covered, your business could end up footing the bill. To protect yourself and your business, you may want to:

• Request proof of insurance from the contractor

• Require that they carry their own liability insurance if they want to work with you

• Add additional coverage for contractors to your own policy

It’s important to review your policy and speak with your insurance broker if you decide to partner with an independent contractor.

How can I add independent contractors to my business insurance policy?

Independent contractors are typically responsible for having their own insurance coverage. However, if you want your contractors to be covered under your business insurance as well, one option is to add them as additional insureds.

This can be done for a specific project or for the entire time your policy is active. Just reach out to your insurance provider and let them know. Keep in mind that your insurance premium or deductible might change depending on the level of coverage.

What does additional insured mean?

As defined by the Insurance Bureau of Canada (IBC), an additional insured is someone who isn’t the named policyholder (you) but still gets coverage under your policy. They can be named or unnamed. This helps protect both them and you if something goes wrong on the job.

Let’s say a third party sues the contractor for something that happened while they were working for you. If they’re listed as an additional insured, your policy can step in to cover legal costs, including lawyer fees, court expenses, and even settlements.

This coverage often includes things like bodily injury and property damage, and even advertising-related claims, like libel or copyright infringement. Reach out to BrokerLink today to find out how to add an additional insured to your business insurance coverage.

Types of insurance that independent contractors should consider for themselves

There are many types of insurance that independent contractors should consider for their own protection. However, which coverage(s) they need will depend on the type of industry they're in.

Many independent contractors start with a contractor liability insurance policy, also known as general liability insurance, which is a type of business insurance for independent contractors. Other popular types of coverage for independent contractors include professional liability, commercial auto, and workers' compensation. The following coverages are discussed in detail below:

Commercial general liability insurance

If you're self-employed, whether you're a graphic designer, tradesperson, consultant, or delivery driver, commercial general liability insurance, or CGL, can help protect you against third-party claims of bodily injury and property damage.

For example, a client accidentally trips over your photography equipment and injures themselves, or you accidentally reverse into someone's driveway pillar, causing structural damage, when making a delivery.

CGL can cover medical expenses, as well as legal or settlement fees. It can also protect against claims of slander, libel, or copyright infringement.

Professional liability insurance

Professional liability insurance, which is also known as errors and omissions (E&O) insurance, is designed to protect you from claims related to:

• Professional mistakes

• Negligence

• Misrepresentation

• Failure to deliver professional services as promised

For example, if you're a freelance consultant and a client claims your advice caused them financial loss, professional liability insurance can help cover your defence and potential payout.

Commercial auto insurance

Commercial auto insurance is mandatory in Canada for any independent contractor who uses their personal vehicle for work-related purposes.

Personal auto insurance won't cover you if you're involved in an accident while working, such as making a delivery, travelling between job sites, or driving to a client's home. Instead, you'll need commercial auto insurance to cover you for things like third-party injuries, property damage, or legal fees.

Workers' compensation insurance

Workers’ compensation insurance is a government-run program that provides wage replacement, medical benefits, and rehabilitation support to workers who are injured or become ill due to their job.

While employees are automatically covered by their employer’s workers’ compensation plan, independent contractors are not. However, you can choose to apply for optional personal coverage through your provincial board (e.g., WSIB in Ontario, WCB in Alberta).

If you're an independent contractor in a high-risk field (like construction or manual labour), getting personal coverage can help protect you if you're injured on the job. In fact, some clients or general contractors may even require you to have this coverage before they hire you.

Additional insurance coverage considerations for independent contractors

Depending on the type of industry you work in, whether it's construction, transportation, tech, or creative services, you may also want to consider adding some of the following coverages to your policy:

• Commercial property insurance

• Business interruption insurance

• Home business insurance

• Cyber insurance

• Builder’s risk insurance

• Product liability insurance

• Equipment breakdown insurance

Note that some businesses or clients may require independent contractors to carry specific insurance policies as a condition of their contract. It is important to review your contracts carefully to ensure that you meet all insurance requirements.

As the exact insurance needs of an independent contractor can vary depending on individual circumstances, reach out to BrokerLink today, and our expert brokers can help you determine the right coverage that best fits your needs.

Why is it important to check that an independent contractor has insurance coverage?

Before bringing on an independent contractor, it’s crucial to confirm they have their own commercial general or contractor liability insurance policy, at a minimum, to protect your business from any bodily injury or property damage claims they may cause. However, depending on what type of work you've hired them to do, you may want to ensure they have professional liability insurance, too. Keep reading to find out more:

Bodily injury liability

Let’s say your contractor is working on your property, and a client or passerby trips over their tools and gets seriously hurt. If that person sues, your business could be dragged into the liability claim. If the contractor has proper liability insurance, their policy can handle those legal and medical costs instead of yours.

Property damage

Now imagine the contractor accidentally breaks a window, floods an office, or damages expensive equipment while working. Without insurance, those repair or replacement costs could fall on your business, meaning you'll have to file a claim and risk an increase in your insurance premiums.

Mistakes or omissions

If a contractor you've hired gives incorrect advice or makes a serious mistake that leads to financial loss, your business might get blamed, too. For example, a freelance web developer accidentally deletes customer data while migrating your site. If a client sues over lost revenue, their professional liability coverage can help cover those damages instead of it falling on your business.

Plus, remember, your business insurance won’t automatically cover a contractor’s mistakes or accidents unless you’ve added them as an additional insured on your policy. However, adding them as an additional insured may also increase your insurance premiums. That’s why many business owners will require their independent contractors to carry their own insurance policy before working with them.

How to protect yourself as a business owner when hiring an independent contractor

When hiring an independent contractor, it’s essential to do your due diligence to protect your business from potential risks. Before signing a contract, ask the potential contractor for the following:

• Licence numbers if applicable (i.e., trades)

• A written proposal that outlines:

  • What work they’ll be doing

  • The total cost

  • Project timelines

• References from past clients

• Proof of insurance coverage

Protip: Call their insurance company to ensure that their policy is active and will stay active while they’re working with you.

Contact BrokerLink to learn more

If you regularly work with independent contractors, it's essential to ensure they have insurance coverage. For additional protection, you may also want to add an endorsement to cover their actions while working on your behalf. The experts at BrokerLink can help you with that. We'll take the time to understand your business and insurance needs and tailor a commercial insurance policy specific to your business.

Need help ensuring your contractors are properly covered? Contact BrokerLink today. You can reach us by phone, email, or in person at any one of our locations throughout Canada. No matter how you choose to get in touch, a BrokerLink insurance advisor will be happy to assist you. We also encourage you to take advantage of our free online quote tool that can provide you with a competitive quote in minutes.