This article was written by the team from WorkMarket, an ADP® Company.
The trend towards increasing use of contractors to fill talent needs is growing rapidly and will continue to do so. As you scale your business with a contingent workforce, having liability insurance for contractors is essential to protecting not only your business, but the worker themselves. Ensuring contractors have transactional insurance similar to workers' compensation and general liability can help your business manage risk in case of accidents or property damage.
One of the key differences between the classification of a contingent worker as opposed to a full-time W-2 employee is who the burden for things like insurance falls on. By having the worker maintain their own coverage, in addition to providing background checks and other onboarding requirements, businesses can add an additional layer in classifying them as an independent contractor.
Contingent workers are no different than W-2 employees in their desire to be a part of something greater and leveraging their expertise to help businesses like yours to succeed. Making it easy for them to obtain insurance coverage for any job they do can go a long way towards showing them that you care that they're protected.
Why should contractors have general liability and occupational accident insurance?
Regardless of the type of business you are in, there is a risk to your contingent workers for injury or damage while "on the job." Occupational accidents happen, such as delivery drivers getting into serious car accidents, tech workers falling off a ladder or programmers and other desk workers can develop carpal tunnel syndrome. Even though workers' compensation insurance is not a legal requirement for, and is generally unavailable to, a contingent worker, it is a type of protection they shouldn't overlook. This is where occupational accident insurance may be advantageous. The cost of medical care alone makes up for the minimal cost of insuring themselves, not to mention potentially lost wages.
General liability insurance may be even more important. Not only is your business possibly liable if a contingent worker negatively impacts a client, but so is the contingent worker. The worker could accidentally drop a vital piece of equipment, rendering it inoperable, or an office worker could accidentally cause third party bodily injury or property damage. Although these are probably very rare instances, it is vital that all of your freelancers procure this essential protection.
Making insurance accessible for contractors
To manage your business risk, don't leave the procurement of liability insurance up to the contractors. Workers may fail to acquire the necessary coverage out of lack of awareness or uncertainty around how to obtain coverage. While the workers themselves will still pay for the insurance, you can make it easy for them to opt-in. When considering coverage – here are three factors to keep in mind:
● Cost – Choose insurance that offers the flexibility of pay-as-you-go or is usage based. Your contractors will likely want to avoid upfront costs or annual commitments since their volume of work can be unpredictable. In addition, usage-based plans tied to specific assignments are generally not as prone to missed payments like an annual plan would be.
● Accessibility – Make it easy for workers to opt-in to insurance as part of their assignment workflows. Minimize the administrative burden for the worker by offering a built-in insurance policy.
● Credibility – Find an A-rated insurance carrier that offers packages specifically for contractors. This way, you don't have to worry about your contingent workers' self-procured insurance provider having the proper resources.